A large part of the cash flow conversation is of course- payables.   It is as important as the receivables discussion we had last time, where we advised to be patient and empathetic with those who owe you money amidst the current climate. 

This time, we want to discuss how to maintain payables when cash may be a little tight (even if you’re getting a loan). 

  1. Prioritize.  Go down your list of payables and prioritize the items that are business critical to maintain.   Use a 1-3 (1 being necessary, 3 not necessary) scale, A to C, whatever works for you-  but make it be a useful tool so you understand the key items for your business.  An example of this would be:

Rent (1)

Payroll (1)

New office equipment (3)

This also helps should you get stimulus money or the SBA loan/grant.   It is important to have an organized list of expenses.  We’re not saying “don’t pay the furniture company”, but in a time when you have to manage your money better than ever before, it’s important to note the expenses that are “mission critical”. 

  • Contact Your Creditors.  It is always best to stay in contact with your suppliers, lenders, and critical creditors, especially in the face of a crisis.   How well you stay in touch with them now will help later because you’re the one giving constant updates when your competitors may not be.   Don’t show your entire hand; just letting them know you’re cutting back on unnecessary expenses will look better upon a later review on whether or not to continue doing business with you.   Workout programs offered by creditors require the workout analyst to review the notes- this means if you call to tell me that you’re struggling and demonstrate a plan, I’m more willing to work with you.
  • Extend Terms.  Jointly with #2, call your creditors and ask for a brief extension on terms.  For example, if your supplier typically demands 15-day terms, ask for 30-day terms.   Your supplier may also be going through some tough times, so don’t ask for something wild- but asking goes a long way.
  • Compare Receivables.  Know when you are getting paid by your customers to adequately time when you make your payments to suppliers.  This sounds basic, but some pre-planning will help with budgeting your payables. 
  • Make a Budget.  Similar to your 13-week cash flow, a budget is needed on a weekly, monthly, quarterly, and annual basis.  This should accommodate every expense in your company, all the way down to your website payment.   Be sure to indicate automatic payments, due dates, and all contact addresses for your suppliers.   
  • Find money.  Now is as good a time as any to find “money in the walls”.   It’s amazing the money you can find when you’re looking for it in outside the box places.   Think about your energy bills, for example- energy brokers are out there and can save millions for your business.  If you do need a loan, a budget will help you identify the amount to discuss with your lender.  Be clear about your needs, and how you’ll use an infusion of cash in a responsible manner.  

These are just a few items that will provide significant insight into the money leaving your company.   If it isn’t something you’ve been doing in your business, you’ll also find some hidden ways to save money.   Now is the time to meet with your accounting team to identify where the money goes, who we pay, how often we pay them, and allows triage in a time where we could all use a little extra. 

If you or someone you know needs help, or just someone to talk to about business, budgeting, cash flow, obtaining funding, or anything else please reach out to any member of our team.

Rob Simon

rsimon@sharpcfo.biz

Rich Hurey

rich@sharpcfo.biz

Beth Sidley

beth@sharpcfo.biz

Lou Garcia

lou@sharpcfo.biz

Jim Gray

jim@jpgadvisors.com

Ryan Dietrich

ryan@sharpcfo.biz

Best Wishes and Stay Safe-

The SharpCFO Team


0 Comments

Leave a Reply

Your email address will not be published. Required fields are marked *