What proactive steps can you take to help your business navigate through COVID-19 and come out successfully at the end of these challenging times?
Cash flow planning will play a vital part in your surviving through this pandemic. With so many changes and unknown issues that can come up, how do you forecast your cash flow?
Cash Flow Forecasting
The importance of knowing your incoming and outgoing cash flow is critical for any business but is especially so during this unprecedented period. Major changes to a company’s cash flow will greatly affect the direction of the company.
Although there is no way to be completely accurate on a forecast, the steps of pulling all of the information together help to paint the picture of the current state of the company’s finances. It can also illustrate any necessary changes that need to be made for the short and long term.
Cash Flow and Insurance Coverage
Protecting your overall business is critical and especially during these challenging times. Every company needs to be properly insured to protect all the hard work that went into creating and growing your business. Comprehensive business insurance should be established to focus on each aspect of your company, to move it forward, and make it successful.
This type of coverage provides a safeguard for unexpected events. Additionally, a fully comprehensive protection plan can provide Business Interruption cover and loss of income. Should you need to temporarily close your doors due to an event covered by your policy, this cover will ensure you still have a business when it is over.
BizCover has access to a network of insurance companies and can quickly provide you free, multiple quotes so you can compare policies without the need to ring around or visit multiple websites. Within minutes you will have options to choose from and can obtain coverage immediately.
Obtaining several quotes from different insurance companies will allow you to see not only the different coverage levels but also the cost of each policy. BizCover can make this process easier and faster. For more information regarding the benefits of comprehensive business coverage, please go to https://www.bizcover.co.nz/business-insurance/.
Control Buttons
There are certain buttons or controls that you can use in your business in order to start or stop a change in your company. Specifically, these indicate areas within your business that will directly affect your financial statement.
Some actions may increase your revenue, bring in business, grow your margins, or conversely, some actions may decrease your costs. Every action will either increase or decrease financial areas within your company, affecting your business in one way or another.
Creating a list of each possible control button within your business and indicating how it would affect your cash flow, will help paint a picture of how your company is doing, as well as provide clarity on your options. The very act of pulling all of this information together and thinking about the effects of each control button can help you map out any action needed if additional funding becomes necessary.
For example, an exercise to increase your revenue might include a targeted number of product sales per day. With this daily goal, you can take the product’s unit price multiplied by the number of units per day, then review the overall margin. This control button would show how you could increase the financials.
On the other hand, an exercise to reduce the outgoing cash flow might include negotiating the costs of certain expenses. For example, if the business’s lease comes up for renewal, negotiating with the landlord for a cheaper monthly rent would result in lower outgoing cash flow and affect the business in a very positive manner.
Big Picture Analysis
In order to get a big picture analysis of your cash flow situation, and the effects of different paths that can be taken, map out three different ways that the company can go. Review a best-case scenario, a worst-case scenario, then the most likely scenario.
Once you have a chance to review all 3 pathways, you will be in the most educated position to make a decision on how to move the company forward. Viewing these three pathways will let you know not only the direction of the company but also which path is the most beneficial for the business. Gathering the opinions of other decision-makers to provide their feedback will also prove to be beneficial.
Monitor, Monitor, Monitor
Armed with all of your cash flow information, focus on monitoring your revenue and expenses closely. Depending upon the current situation, it may be necessary to monitor daily or weekly. Keep a close eye on the situation so you’ll be ready to hit one of the control buttons, if necessary.
With so many unknowns still to come, it’s important to be prepared with as much information about your cash flow as possible. Keep the information up to date and be ready to make any changes necessary to get through these challenging times.