We know that COVID-19 is causing unparalleled problems - especially for small businesses.

Now more than ever, it is essential that you know your cash flow and the factors that impact your future cash flow.

We have created this resource center to help you plan your cash flow easily and quickly.

We are in this together.

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Plan your cash flow during the COVID-19 crisis:
5 ways to stress-test your business now!

We know that COVID-19 is causing unparalleled problems - especially for small businesses.

Now more than ever, it is essential that you know your cash flow and the factors that impact your future cash flow. Watch this FREE webinar to learn 5 ways that you can stress-test your business to help you plan your cash flow easily and quickly.

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Top actions your business should do now

Evaluate your expenses right now!

Look at your expenses and decide which are the “musts” and which are the “wants”. For the “musts”, you’ll need to decide which are critical to run your business and then based on what you decided, see if you can downsize them while maintaining the viability of them. Next, prioritize the “wants” and then decide which ones you can do without for now and potentially cancel them. Some vendors lets you put the services on “hold” so you might consider this especially if you have negotiated a good deal on the base cost of the expense and don’t want to lose the special “deal”. CashFlowTool offers great insights to your past and future expenses. Watch the video to quickly see how CashFlowTool let’s you not only see the expenses, but also evaluate the real-time impact to your cash flow.

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Never Be Surprised By Your Expenses
Control Your Cash

Review your future income

Now is probably the most important time in your business to fully review your future income. You need to know which customers are going to hopefully continue with you at this time. The first thing to do is to use CashFlowTool and view the list of customers (sorted by revenue) that is coming in over the next 3-6 months. You are going to want to immediately see the impact on your cash flow if you no longer have the customer income coming in. By doing this, along with the expense control (above), you will have a good picture of what your cash flow really is and the overall impact to your business. You may find that some customers won’t have a big impact on your cash flow, whereas others will. Those that you prioritize is strategic to your business, reach out to them and assess where they are at. If they are on the fence, and you still need them, consider offering a discount to keep them.


Stress test your P&L

Create what if scenarios to model what cash could look like
with new revenue and expense assumptions

Now is a time to understand what the best and worst case scenarios will look like from a cash perspective in your business. Stress test your P&L by creating different revenue and expense “what if” scenarios based upon the new realities that COVID-19 has created for your business. What if my sales stay flat for 4 months? What if my sales decline by 40% over the next 90 days? What if I reduced staff? What if my supply chain is disrupted? Understand what best case and worst case looks like. Create financial thresholds that trigger additional business decision points. Revaluate regularly to make sure you are working with the latest information.

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Calculating and forecasting your cash burn rate

How long can we survive with our level of cash today?

Burn rate measures how fast a company spends its available cash. This is typically a measure used in the early stages of a company as they work towards profitability, however, it is also a useful metric when there is a major change or shock to a business (i.e., revenue suddenly slows or stops). In these cases, it helps a business determine how long they can survive with the cash they have available today. Once you understand the components of your burn rate, you can plan out different options you have to manage it (i.e., make your cash last longer). Managing your cash burn rate is all about managing monthly expenses.

Cash burn rates are typically measured monthly but can be measured weekly or daily if necessary. There are two types of cash burn rates:

  • Gross cash burn rate – Total amount of cash you are spending per month. To calculate a monthly figure, add the cash outflows for each month during a period (i.e., 3 months) and divide by the number of months.
  • Net cash burn rate – The difference between cash in and cash out per month. To calculate a monthly figure, add the net cash inflow/outflows for each month for a period (i.e., 3 months) and divide by the number of months.

You can calculate these rates to learn more about the performance of your company in the past as well as plan your cash burn for the future. When there is a major change to your business, your burn rate moving forward could be the difference between your business’ survival and salary cuts, layoffs or business closure.

The first step to managing a metric is to measure it. CashFlowTool offers the ability to measure historical cash burn (or cash surplus), both gross and net, for the last 12 months, as well as the tools to forecast cash burn for the next 6 months. Watch the video to quickly learn how.


Cash break-even analysis

How much revenue do I need to cover my expenses?

The cash break-even point is the minimum amount of cash revenue required for a company to achieve neutral cash flow (cash inflows = cash outflows). A cash break-even analysis measures this over a period (i.e., 6 months) and will help you find the amount of revenue you need to generate to cover all your cash expenses during that period. Here are the steps to preparing a cash break-even analysis:

  1. Review your monthly cash expenses and identify those that are fixed vs. variable.
  2. For fixed expenses (think payroll, rent + utilities, equipment leases, etc.) insert these each month moving forward. Your total fixed expenses is similar to your gross cash burn above, since this represents the total cash you are spending per month regardless of sales activity.
  3. For variable expenses (costs that change based on the amount that you sell) start by entering monthly costs that would be required to achieve at least the amount of fixed expenses above.
  4. Add up the total monthly costs for the period, both fixed and variable, to arrive at the amount of cash revenue required to achieve neutral cash flow. Note: once you see the revenue amount, you may need to increase the variable costs accordingly if more cost is required to achieve that amount of revenue.

CashFlowTool offers the ability to create a cash break-even analysis. Watch the video to see how.


Manage your receivables

Carefully and regularly monitor your outstanding invoices. Don’t assume all payments will come in as scheduled. Reach out and engage with your customers to get a better understanding of the status of their businesses and realities of any delays in being able to pay for outstanding obligations. Evaluate which customers you are able and willing to offer extended payment terms to and be sure to consider the impact on your business.

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