The coronavirus has presented risks not only to our personal health but also to the financial health of many businesses. The provincial and federal government policies to enforce social distancing to #flattenthecurve has led to a sudden fall in revenue for many businesses.
Many business owners are asking what they can do to survive the impact of COVID-19. Cash flow management will be important. Here are some cash flow tips to consider:
Reach out to your lender to ensure there is no impact on your current credit facilities and inquire about new loans or revised payment options should they be required.
In addition, on March 13, 2020, the federal government announced the establishment of a Business Credit Availability Program (BCAP) to help Canadian businesses obtain financing during the current period of uncertainty. To seek support through BCAP, contact your financial institution. If your business’ financial request exceeds the level your financial institution can provide, the financial institution will work alongside the Business Development Bank of Canada or Export Development Canada to access additional resources under BCAP. More information is available on the Department of Finance website.
Now is the time to review the expense line items on your income statement to look for saving opportunities that can be obtained by cutting discretionary items such as advertising and consumables. Review your service agreements and determine if the same level service is currently required and if they can be renegotiated. Consider reducing contract labour and working hours of full-time staff. Apply for the Government of Canada’s Temporary Wage Subsidy. More information regarding this subsidy is available on the Canada Revenue Agency’s website.
Accounts Receivable Management
As Canadians, we tend to be lenient during difficult times. However, this could dramatically impact your cash inflow. You should contact your clients/customers and encourage them to pay, possibly offering a small incentive to pay early.
From the administrative side, you should:
- invoice as soon as your product or service is delivered or provided;
- regularly review your aged accounts receivable summary and actively follow up with slow-paying customers.
Accounts Payable Management
Managing accounts payable may prove to be difficult, as many of your suppliers are likely in the same situation as you. When necessary, contact your suppliers to seek payment extensions and possibly delay deliveries or cancel orders.
Take advantage of the Canada Revenue Agency’s deferral of income taxes and installments until August 31, 2020. More information is available on the Department of Finance website.
Do you have automatic inventory shipments? Consider whether they should be put on hold or the frequency reduced. Is your business seasonal? Consider whether you need to reduce your seasonal ordering. Now may be the time to consider discounting and promoting your slow-moving inventory items to generate sales.
There is hope as we are seeing unparalleled levels of funding and resources to support businesses.
For more information, please contact your McCay Duff advisor.Contact Us