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Pragmatic, effective strategies to help your business navigate the COVID-19 crisis - Cash Flow

27/03/2020


This is the first article in a 5-part series on "Pragmatic, effective strategies to help your business navigate the COVID-19 crisis"

With news about the global coronavirus pandemic continually evolving, business owners are understandably confused and worried. There are immense risks amidst the disruption we are all experiencing — but also new opportunities to serve your customers and position your company for post-pandemic success.

This is a crucial time for business leaders to navigate carefully. Throughout this five-part series, we will provide you with current information, practical suggestions and helpful resources to keep your business on a safe pathway through disruption — and position it for accelerated success when the coronavirus crisis has passed. 

  1. Stretch cash flow
  2. Preserve your workforce
  3. Reinforce revenue
  4. Demonstrate strong leadership

Stretch cash flow

Right now, cash flow really is king.

Demand for your products or services hasn’t ceased; it has shifted. Customers are delaying purchases of certain goods and services in favour of others that are more urgent right now.

The first step to adapt to this dramatic shift is to identify potential impacts to cash flow. Then you can take appropriate action to manage potential problems.

Prevent a cash flow crisis

Using your sales forecasts and our 13-week running cashflow template ( download) as a guide, prepare weekly cash flow forecasts for at least the next three to eight months. This will help you understand your cash flow needs and determine how long your business can continue without burning through your working capital.

Now you need to focus on strengthening cash flow.

Develop key supplier and customer engagement strategies

Identify all the customers and vendors who represent critical accounts. Reach out to those critical customers to understand how their needs have shifted.

Consider whether you need to adjust your sales channels. For example, some customers who were historically uncomfortable operating in a digital world may be changing their preferences. This is creating new business dynamics going forward.

To minimize supply chain disruptions, coordinate with key suppliers to ensure you can meet the needs of your critical accounts. Communication and collaboration are essential, so initiate discussions regarding your supply needs and their commitment to meeting these needs. Then create specific procedures to engage and retain these strategic partners.

To preserve cash, manage payables carefully, prioritizing important strategic vendors when timing  payments. For others, discuss flexible or extended payments.

Tap into government support programs

Now’s the time to maximize government grants, credits and other financial or worker support opportunities for your business.

The federal government announced new economic stabilization measures as part of its COVID-19 Economic Response Plan. These measures will provide up to $82 billion in direct support to Canadian workers and businesses. Some of the key measures for Canadian companies include:  

Enhanced support through the Canada Account — Export Development Canada (EDC) will provide qualifying Canadian companies with increased access to loans, guarantees and insurance policies.

Temporary wage subsidies for workers ­— The government will provide a temporary three-month wage subsidy to eligible employers facing revenue losses to help prevent layoffs.

This will be equal to 75% of remuneration paid during that period for any company that has seen a 30% decline in revenue. Further details will be provided pending comprehensive government announcement expected on April 1. 

It is believed that for most Canadian businesses, the Work-Sharing Program is still the best option (as of March 31).

Tax payment deferrals — The Canada Revenue Agency (CRA) is allowing all businesses to defer the payment of any income tax amounts owing on or after March 18 and before September 2020 until after August 31, 2020. The relief applies to both tax balances due and instalments under Part I of the Income Tax Act.

No interest or penalties will accumulate on these amounts during this period. As well, the CRA will not contact small or medium businesses to initiate any post-assessment GST / HST or income tax audits for the next four weeks. Business owners should consider using this tax relief to preserve cash flow or build capacity as needed.

New Business Credit Availability Program (BCAP) ­— EDC and the Business Development Bank of Canada (BDC) will provide more than $10 billion of additional financing to businesses facing economic challenges caused by COVID-19. The program helps Canadian businesses in all sectors and regions access credit through EDC, BDC and private sector lenders.

BDC relief measures for qualified businesses:

  • Working capital loans of up to $2 million with flexible terms and payment postponements for up to six months for qualifying businesses.
  • Postponement of payments for up to six months, free of charge, for existing BDC clients with total BDC loan commitment of $1 million or less
  • Reduced rates on new eligible loans
  • Additional BCAP measures, including industry specific support, to come

More information: bdc.ca/coronavirus

Export Development Canada
Contact EDC directly  to speak with an advisor regarding potential support: [email protected], 1-888-220-0047 or 1-800-229-0575 or submit an inquiry online.

Your MNP advisor can also provide information regarding appropriate provincial, territorial and municipal COVID-19 supports for businesses and help you access relevant programs.

Prepare for Business Interruption during the COVID-19 Pandemic

MNP’s National Leaders of Enterprise Risk and Business Resilience, Mariesa Carbone and Cliff Trollope, prepared a guide to help businesses develop appropriate plans to minimize business disruption during the coronavirus pandemic: Preparing your organization for business interruption from COVID-19.

Find an advisor near you

Our experienced professionals are here to help you make the best possible decisions. If you do not currently have an MNP advisor, complete this brief online form to help us determine your needs and concerns and an appropriate MNP professional will be in touch within 24 hours.

Learn more at MNP's COVID-19 Business Advice Centre

Strategies and tools to help your company navigate the coronavirus crisis, stay resilient and take the next steps towards recovery.

Yohaan Thommy, PMP, CMC, is a Partner with MNP’s Consulting Services team and leads the firm’s national performance improvement practice. You can reach him at [email protected] or 905.220.3211

Daniel Caringi is a Partner with MNP’s Consulting and Technology Solutions team. You can reach him at [email protected] or 416.626.6000