Help Managing Cash During A Crisis

As I always say, cash is QUEEN! During times of financial crisis, when your inflow of cash slows down, it’s more important than ever to manage closely your amount of cash on hand. Now the solution to best manage the amount of cash you have on hand will look a bit different for each business. The key is finding out what makes the most sense for YOUR current situation and YOUR business.

To help you determine how long your cash on hand will last so that you can determine your best path forward, I wanted to equip you with my quick and easy 3 step way to estimate this timeframe.

In a distressed economy, like our current one where sales may have completely halted, it’s critical for you to know the number of days that you can continue to pay your operating expenses (i.e. salaries, rent) given the amount of cash you currently have available.

The goal is to understand what your business can currently take on or how big of a financial hit it can take WITHOUT going into debt or getting another form of financing.

Here’s how I want you to determine this for you business:

Step #1 Determine your average monthly CASH operating expenses i.e. salaries, rent (let’s say that number is $5K)

Step #2 Take the amount of cash you have on hand and divide it by your average monthly cash operating expenses (the number you came up with in #1 (let’s say you have $10K cash on hand, so ($10K/$5K) = 2 MONTHS

Step #3 interpret your results. There you have it, 2 months is an estimate of the number of months you can go with no sales and still cover your monthly cash operating expenses.

Equipped with this information, how far your cash on hand will go if sales have completely stopped, the next thing is to determine what’s the next logical step for your business.

Will you need other financing options to get you through? If loans are the pathway that’s best for your business right now, here’s my recommendation. Prioritize grant and forgivable loan applications – you don’t have to pay these back if you stay within the requirements. Know that SBA loans or any other loans are NOT guaranteed. Businesses are getting denied for loans, even SBA loans, so it’s incredibly important that you submit a strong loan application from the start to positioning your business to have the greatest chance of success at being approved.

Or do you feel confident that you can hold as is and just focus on restructuring your costs and pivoting to generate an inflow of cash revenue? If that’s the case then great, just make sure you are restructuring your costs in the most advantageous effective way that not only benefits you now but will also not stunt your progress when we get on the other side of this.

Or maybe you’re not sure what makes the most sense for you right now and the thought of approaching any of this makes your head spin. Well, guess what? That’s okay too. The key is to assess your current situation and see what you can take advantage of right now, and what makes the most sense for your path forward.

No matter what you decide once you determine your amount of cash on hand, the one thing I don’t want you to do is to get so overwhelmed with everything happening that you become frozen to taking action. You need to act, there’s no doubt about it, but it’s just about what’s the best course of action for YOU and YOUR business.

If you need help with creating Financial statements for your loan and grant applications or If you think you need to restructure your costs (for most businesses, no matter if you go for loans or grants or not, this will be critical) or if you’re unsure of what approach is best for you right now, reach out via hello@financesavvyceo.com.  Let’s assess your current situation, see what you can take advantage of, and determine options for your best path forward.