Understanding your future environment
The current COVID-19 situation has left many business owners feeling overwhelmed by the loss of revenue and uncertainty over the future. It's not possible to predict when conditions will change, but when they do, it is unlikely to be "just like it was before".
Your planning must consider the following environments:
- While 'shelter in place' continues
- When restrictions are eased. How will your business function?
- Will we go back to 'shelter in place'?
- All businesses are open.
Developing an operational and financial plan allows you to make proactive data-driven decisions on how to keep your cash flow positive and to be prepared for future changes. If you don't yet have a 13-week cash flow analysis, see this post with an example.
Actions to take today
- Review your contracts for any personal guarantees and force majeure clauses.
- Ask your vendors for new payment terms
- Determine which expenses can you defer or cut. Look for discretionary expenses like training.
Audit your Accounts Receivable
- Have you segmented your customers based on their credit rating? You should consider their previous payment history and how the downturn will affect them, so you can rate them from A to C
- Focus your sales efforts on your A list.
- Consider new payment terms, deposit requirements and personal guarantees from your C list.
Carefully review your inventory
- How much inventory should you carry from this point?
- Should you cut prices to reduce inventory?
- How often should you review your inventory reorder points?
Questions for the future
- Which customers will you have in 6-months?
- How strong will their demand be given the nature of their business or personal finances?
- How many of your suppliers will be in business? Should you research your options or start diversifying now?
Call C-Link Consulting at (248) 781-0150 or email email@example.com to schedule a complimentary 30-minute consultation. From there we will:
- Determine if you require a day by day cash-flow analysis
- Enable you to classify your customers and vendors
- Work with you to determine the effects of various "what if" scenarios. What would happen if revenue dropped 10%, 20%, or 40%?