On the Right Track

The importance of setting a clear direction for cash flow and revenue streams

With news about the global coronavirus pandemic continually evolving, business owners are understandably confused and worried. The change has or will have immediate impacts on your cash flow, which can quickly impact all phases of your operations and your long-term viability. It's time to be creative with your revenue sources.

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  • Prepare weekly cash flow forecasts for at least the next three to eight months to understand your needs.
  • Communication and collaboration are essential, so initiate discussions regarding your supply needs and vendor commitments.

  • Consider bringing in experts for a couple of days who can identify ways to quickly ramp up production, workforce and supply chain capacity.

For more practical advice on a safe pathway through current disruption contact Yohaan Thommy.

Cash Flow is King

The comforting truth is that in all likelihood COVID-19 hasn't permanently ceased the demand for your businesses products or services. But it has shifted in consequential ways as customers are delaying purchases of certain goods and services in favour of others that are more urgent right now. Identifying cash flow problems before they occur it will increase the value and impact of any mitigating actions you can take. There are six important steps that you can take now to help strengthen your cash flow.

How to Strengthen Your Cash Flow

1. Prepare weekly cash flow forecasts

Using your sales forecasts and MNP’s 13-week running cashflow template as a guide, prepare weekly cash flow forecasts for at least the next three to eight months.

This will help you understand your cash flow needs and determine how long your business can continue without burning through your working capital.

2. Identify all critical accounts

Reach out to all the customers and vendors who represent critical accounts to understand how their needs have shifted and how to best meet those needs.

3. Manage payables carefully

Manage payables by prioritizing important strategic vendors when timing payments. For other vendors, discuss flexible or extended payment options.

4. Adjust your sales channels

Consider how you can adjust your sales channels. Some customers who were historically uncomfortable operating in a digital world may be changing their preferences. This is creating new business dynamics going forward.

5. Coordinate with key suppliers

Coordinate with key suppliers to ensure you can meet the needs of your critical accounts. Communication and collaboration are essential, so initiate discussions regarding your supply needs and vendor commitments. Then create specific procedures to engage and retain strategic partners.

6. Tap into government support programs and tax deferrals

Now is the time to maximize government grants, tax deferrals, credits and other financial or worker support opportunities for your business.

Which Government Programs Fit Best?

The federal and provincial governments released many very useful grants, subsidies and loan programs to help companies improve cashflow. Upate summaries of these programs are available on MNP's COVID-19 Business Advice Centre.

The most popular program is the Canada Emergency Wage Subsidy (CEWS) which provides employers a subsidy to cover 75% of an employees wage for a period of 12 weeks from 15th of March to 6th of June 2020.

Organizations will also need a longer term plan for how to manage payroll costs, at which point the Work Sharing Program is a great secondary option as it allows companies to reduce their payroll costs by almost 60% for a longer period of 76 weeks.

The Work Sharing and CEWS grants can be used in conjunction and compliment each other quite well. For companies that do not qualify for CEWS, the Work Sharing Program is the next best replacement.

Utilizing these government grant programs must be an integral part of your strategy to maximize cashflow. MNP has prepared a Decision Tree tool to help you navigate which grants you could / should consider for your business.

A Quick Comparison: CEWS vs Work Share

Replace or Add Revenue Streams

On top of these cash flow considerations, you need to consider ways to potentially diversify your revenue streams and find new profit opportunities. Regardless of your industry, there will be ways of providing goods and services that you haven’t yet considered.

Instead of viewing current circumstances as surviving – pivot. For example, Corby Spirit and Wine is adding hand sanitizer to its Windsor, Ontario production line. And an MNP client in the medical sector who manufactures laundry management systems is producing easily sanitized stainless steel carts to meet more urgent needs in hospitals and clinics.

For distribution companies with excess capacity, consider renting inventory space to manufacturers or other distributors in industries where sales are spiking.

The guidance in this article is from MNP's series on "Pragmatic, effective strategies to help your business navigate the COVID-19 crisis"

Re-tool with the Government’s Financial Assistance

Canada’s Plan to Mobilize Industry to fight COVID-19 is creating pathways to get domestic manufacturers and businesses the resources they need to help during this critical time. New measures will directly support a business’ ability to rapidly scale up production or re-tool manufacturing lines so they can develop products that will help in the fight against COVID-19. These products include critical health and safety supplies and equipment such as personal protective equipment, sanitization products, diagnostic and testing products and disease tracking technology.

There will be fast-tracking of approvals to deploy funds on an accelerated basis.

As well, the federal government is issuing a call to all businesses to help make products / services that assist in their response to COVID-19. A manufacturer can contact the COVID-19 task force directly or contact MNP and we will assist.

Do a Quick Productivity Improvement Assessment

For companies whose product demand has exponentially accelerated, such as food processing or medical manufacturing, conduct a quick productivity improvement assessment. Assess ways to run your processes with fewer resources (e.g. people, financing, working capital). Consider bringing in experts for a couple of days who can identify ways to quickly ramp up production, workforce and supply chain capacity.

Invest only in product lines that will turn orders to cash quickly to reinvest in ramping up your revenues. Going forward, businesses that can operate with fewer key resources will be stronger and more resilient.

Yohaan Thommy, PMP, CMC, is a Partner with MNP’s Consulting Services team and leads the firm’s national performance improvement practice. You can reach him at yohaan.thommy@mnp.ca or 905.220.3211