Critical conversations to support your cash flow strategy

COVID-19 has forced organisations across Australia to adapt rapidly to new challenges, and nowhere is this need for change greater than in your cash flow strategy. With supply chains disrupted and consumer behaviour drastically changed, it is crucial for every business to course-correct and ensure that their strategy is still delivering for them even in this new environment.

Despite operating with a different business model or purpose, the not-for-profit industry is not exempt from this conversation. Like all other businesses, charitable organisations need to constantly review their cash flow strategy to ensure they can continue to serve their community during and beyond COVID-19. Implementing your new cash flow strategy means gaining the support of key stakeholders, so continue to reach out to the following stakeholder groups over the next few weeks and months.

1. Customers

Talk to your customers, especially the important ones as they are one of your organisation’s most valuable relationships. You should have a conversation with them to confirm their on-going goods and service needs and, importantly, their ability to pay their invoices on time. How would a change in their demand impact your revenue stream? Monitor your pipeline and plan for the possibility of declining demand, delays in orders, and or cancellations. Foresight here can save you a great deal of frustration later.

2. Debtors

If you have unpaid accounts, now is the time to collect. Call in outstanding debts. If you have supplied good or services, then you are entitled to be paid – it is your money. Consider how you can recover outstanding amounts and think about alternative solutions, such as invoice factoring or using debt recovery specialists, to get ‘your’ money into your account as quickly as possible. Equally, take this opportunity to identify debtors who are less likely to be able to pay. What impact would a few unpaid accounts have on your business? Can you afford to be lenient and share the debt with some customers to maintain the relationship for the long term.

3. Suppliers

Talk to your suppliers about their ongoing ability to supply and, if needed, negotiate new supply volumes and payment terms. Will unit prices go up if you are purchasing less? Are alternative suppliers offering better terms? Audit your inventory thoroughly. Do you have too much stock sitting in a warehouse, and what are your strategies to move on as much stock as you can, quickly and cost-effectively. ‘Suppliers’ can also include lease and rent agents. If you have a reduced income, what can rent you afford? Will your landlord be more flexible under the current circumstances? Can you meet your commitments as specified in your contract?

4. Creditors

If you haven’t already, consider asking for a moratorium on payments, or offer to pay interest only. Like you, your creditors will want to be paid and, by having a conversation with them sooner rather than later, you may be able to avoid them trying to recover debt through an agency or the courts. New payment plans or changed terms must be confirmed in writing. As negotiations may take a little while, begin the conversation as soon as possible.

5. Employees

Clearly communicate the challenges facing your business, and the steps you are taking to address them, to your employees. Identify your best performing employees and ensure they are protected and retained. If you have staff working remotely, check in regularly and ensure support mechanisms are in place for those facing challenges. How much has your business changed and do you really need all staff? Do you understand your obligations to those employees you have to let go? JobKeeper and JobMaker may be options to explore also.

6. Australian Tax Office

Directors must ensure their business lodges its returns by the due date to avoid personal liability. Even if the company cannot make the payment, it must lodge to avoid the ATO’s Directors Penalty Notice provisions from being enforced. The ATO has made it clear that it will work with businesses that are unable to meet their tax obligations, and they are open to payment arrangements. However, the ATO will be less inclined to consider arrangements if lodgements are outstanding. Please contact us if you would like Bentleys to talk to the ATO on your behalf about tax debt repayment and lodgement extensions. We can ensure you have all your financial statements in order, and provide the ATO with an understanding of what you can afford to pay if instalment payments are agreed to.

7. Bank and non-bank finance

If you need a loan extension, be sure to talk to your bank. Bank and non-bank finance is available for good businesses facing a cash flow crunch. Again, the banks will want to see that your financial statements, operational plan, and cash flow forecasts are up-to-date and accurate. Bentleys can help you prepare your three-way financial forecast to make it easier for banks to consider and meet your request. This can include:

  • a detailed forecast of future revenues and expenses,
  • a detailed forecast of future cash flows, demonstrating your capacity to service and repay debt, and
  • a projected balance-sheet.

Continue to be vigilant with your cash flow

While the precise steps you need to take will depend on your individual organisation’s situation, we believe that the above are the key priorities for any attentive business owner during the current pandemic.

Bentleys has extensive experience helping organisations navigate challenges of every shape and size. If you are grappling to put your new cash flow strategy into action or need assistance building it, our advisors will be happy to help.

Contact your local Bentleys advisor. We are here to help you navigate these challenging times and to help you get to where you want to be.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.

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