COVID-19: Long Term Cash Flow Management Tips

March 31, 2020

Monday, March 30, 2020; 12:10pm-1:10pm

COVID-19: Long Term Cash Flow Management Tips

Panelists: Aaron Chaitovsky / Alan Badey

Webinar Summary –

IFA supplier leaders from global accounting firm Citrin Cooperman provided participants with “timeless tips” and guidance for businesses to conserve cash flow as they contend with business interruption. The panelists offered both short term and long term solutions to deal with the current crisis, including: deferring expenses; communicating with bankers to manage possible refinancing and repayment options; tax deferral; and review of existing contracts. Longer term, the panelists recommended planning for new sources of cash flow via government loans with an eye toward accommodating labor changes, and preparing business for liquidity challenges going forward.

Key Bullets –

Identify strategies for short-term triage and long-term triage
Short-term: expense deferral; advisor communication; tax deferral; contract review.
Long-term: cash forecasting; identify and apply for new liquidity sources; compliance review; process and workforce review
When new liquidity does come in, have a plan for what your business will do with it and how to best manage the cash runway given labor, benefit, and payment needs

Full Bullets –

Providing timeless tips to conserve cash on a going-forward basis
Surviving and then thrive
- Short-term triage
- Long-term triage
Short-term triage
- Stay close to your customers
  - Consider additional discounts; explain your situation; payments of balances are accelerated/paid immediately by wire or credit card
- Reduce/defer expenses
  - Evaluate ALL automatic payments, scrutinize these
  - Contact suppliers and vendors
  - Evaluate purchase commitments
  - Analyzing current inventory levels
  - Eliminating all non-essential spending
- Communicate with bankers
  - Consider ability to meet upcoming covenants; have waiver discussions early
  - Refinancing/requesting extended repayment terms for outstanding debt
  - Non-traditional lending options
  - Draw down on available lines
  - Request short term credit increase
- Individuals and businesses w/ federal tax liability
  - Deferring personal income taxes
  - Contact IRS to cancel automatic debits for tax payments scheduled for April 15th
  - Claiming payroll tax credit
  - Get your information together now, rather than waiting for July 15th – file earlier if you can
- Many insurance considerations
- Review all existing contracts
  - Some franchisors are closing corporate-owned locations
  - Reach out to your attorney/leasing agent to determine where you stand in lease agreements

Long-term triage
- Cash forecasting (effective use of 13 week cash flows) – balancing need for revenue and outflows (like labor). Looking at different levers that we can pull to adjust for outflows – like labor changes (furloughing, pay decreases)
- If we give up on profitability today and just focus on cash, it will hurt down the line
  - How long will my liquidity last?
  - What is my cash runway?
  - How do I reforecast my cash burn rate?
  - Stress testing
- Liquidity
  - Are historical sources of liquidity still valid?
  - Can I re-negotiate terms of lines of credit? – look at your facilities now and term them out
  - Can I still access new lines of credit?
  - How to access government funding?
- Compliance
  - What disclosures do I need in financial statement due to Covid-19.
  - Who can help me review my major contracts? (lease, vendors etc.)
- Internal controls
  - Workforce working from home changes procedures for cash disbursements
  - ACH/Wires/Credit card payments
- Stakeholder confidence
  - Validating plan with stakeholders
  - Being honest with the need to constantly monitor and change
- Government Programs
  - Assess what relief is available
  - SBA loans to Small businesses
  - Loan forgiveness packages
    - Personal guarantees vs. not
- Process
  - Where to start?
  - What do I need to apply for aid?
  - Who should I be asking for help (banks, insurers, accountants, attorneys)
- HR Concerns
  - Optimal levels of staffing – approach to best protect staff
  - How to best staff the organization
    - Consider outsourcing
  - When to consider furloughs or layoffs?
    - Work with HR to determine best course of action given state and federal rules, like WARN Act
  - How to design these packages?
    - Benefits are just as important
  - What about payroll tax relief?
- Workforce Enablement
  - How do I enable the team to WFH?
  - How do I ensure my employees understand what solutions are available to them and how to use them?
    - Internet, technologies available to them
    - Risks, like loss of control of data outside the office; example: limited the ability to print information from home
  - Training on technology; utilizing IT
- Cybersecurity
  - How to protect against threats/limit risk?
    - Consider limiting access to only a firm issued computer
    - Stopping malfeasance in home computers
  - What is the most important for my workforce to understand as they WFH, considering heightened cyberattack environment
  - Resources for cyber training/cybervulnerability/protection programs

Short-term à You can’t sit still, you must act now
Long term à you’re going to be around for many years. Plan for it

Payroll forgiveness – retroactive?

Laid off employees qualify for forgiveness in PPP

What are you going to do with the cash when it comes in? Bring in the cash with a plan. Look to the long-term plan

Recommending energy efficient upgrades to reduce overhead? Do a cost benefit analysis to determine if return is going to be worth the cost of investment. Both environmental component, and possible credit that can be taken as a result.

Payments to 1099 to independent contractors are capped at $100,000 per year. Though you might be paying someone as an independent contractor, legislators are trying to treat them as an employee