Cash Flow Management in the New Normal

We are living through unprecedented times of abrupt and major change. No one is unaffected by the rippling effects of this pandemic and the economic repercussions. Essentially, every business is now in transition, dealing with new and unexpected challenges. Furloughed staff. Employees working remotely. Temporary closings. Supply chain disruptions. We’re seeing a cascade of financial challenges…and we don’t yet know what recovery looks like or how quickly it will come. We are almost certainly facing a new normal for the foreseeable future.

Ken Yager, turnaround expert and President and founder of Newpoint Advisors, notes, “The companies that call us are good at what they do subject-matter wise, but are having other challenges running their business, including countering market forces that create unforeseen performance hurdles.”

At Gibraltar, we have been working long enough with companies in transition to know that, in spite of the problems, there are plenty of reasons for hope and optimism. No matter why a company becomes distressed, the basic tactics of a successful turnaround strategy remain the same. And three of these key tactics are to:

  • Focus on cash first
  • Make use of all of your advisory resources
  • Innovate

Focus on Cash First

A cash flow model is a useful tool that can help business owners make the most effective, efficient, and appropriate use of available capital. “It is important to note that a cash flow model is only as good as the information available at the time it is created. To remain relevant and useful, it must be kept updated as changes occur within an organization,” according to Gibraltar Business Capital CEO Scott Winicour.

Your cash flow model will show the flow of cash into and out of your company and the uses to which this cash is put. It should include cash flow related to three aspects of your business: collections, disbursements, and liquidity. You may be tempted to focus on weekly forecasts right now, but investing the time to create a longer term model — 13 weeks is a best-practices time frame — can help you recognize critical problems earlier.

Your company can use accounting software, an online template or professional coaching to help in preparing this type of financial statement.

Right now, it will be valuable to do more than look at your historical figures. Project multiple future scenarios to account for the unknown pace of re-openings, supply chain issues, occupancy restrictions, social distancing, etc. Planning for potential problems will give your business the best chance at weathering temporary revenue uncertainties or fluctuations.

Make Use of Your Advisory Resources

Our article on turnaround tactics points out the importance of interacting with all of your stakeholders during transitional times. And Yager also advises, “Take care of your partners – lenders, vendors, employees, etc. You need the right people going in the right direction to take you the way you want to go.”

First, be transparent with your people and share the struggles the company is experiencing. Then listen and collaborate. Collaboration serves two important purposes. It can help you uncover the challenges facing your business. This is new ground. Don’t guess. It’s also the best way to find great solutions. Multiple viewpoints combined together can generate more and better ideas.

You have many resources that you can tap productively. You may already have spoken with your management peers and your CEO, but be sure to have conversations that are specific and focused. Gather ideas, write them down, disseminate them to everyone and then discuss them again. Pull in other sources, especially those with business and finance expertise, such as your board membership, financial sponsors if you have them, turnaround experts, financial advisors, accountants, your lending team, etc.

Don’t make this just a top-down conversation, though. All your resources have insights to share. Talk to your suppliers about how they are holding up. Talk to your customers about what they expect and want right now. Talk to your employees about their concerns in returning to work onsite or continuing to work remotely.

And this is an important time to reach out to your bench, your next generation of executives — the people in your company that will be leading it soon. They have intelligence, skills, and ideas that you should be recognizing and using now. If you don’t have a strong bench in place, this may be a good time to build that resource for the future.

Leverage Gibraltar’s Innovative Thinking

Standard solutions are usually ineffective in solving novel problems. That’s why innovation is equally critical in turnaround situations and a global pandemic.

At Gibraltar, we are trained to listen, think differently, and take unique circumstances into account. Our expert lending team has spent years developing innovative financing solutions to help companies survive challenges. Talk to us about what you are experiencing today. We can offer reliable information and flexible, tailored financing to give you options and a cushion to meet unexpected situations.

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