Watch: Financial and Operational Strategies to Weather Uncertain TimesJune 3, 2020
Thomas Alongi, Managing Director, National Manufacturing Leader, UHY
Alex Conti, Managing Director, Corporate Finance Leader, UHY
Cindy Hannafey, Managing Director, Transformation Solutions Leader, UHY
Due to the COVID-19 pandemic, businesses have had to navigate a rapidly changing environment and learn to adapt time and time again. Businesses now face the question of whether they can remain open permanently or if a second wave of the virus will hit, causing further shutdowns. A business well-prepared for success will anticipate all possible scenarios moving forward. To assist businesses in creating financial and operational strategies to anticipate the challenges to come, UHY spoke to Detroit Regional Chamber members in a Restart Webinar.
By now, most businesses are past the initial phase of the crisis which involved immediate response. Now that businesses can open up again in Michigan, they must move into the next phase of the crisis. The first phase required taking action to stay afloat, where businesses applied for grants or loans like the Payment Protection Program (PPP) to fulfill immediate cash obligations.
Now that businesses have progressed to the next phase of the crisis, they should take the following steps to analyze and manage cash flow:
- Create detailed documentation of the company’s 13-week cash flow
- Identify critical short, immediate, and long-term cash needs and loan uses
- Run sensitivity analyses for various scenarios
Rapid Response Plan
Companies should use their cash-flow forecasting to support strategic decision-making. UHY encourages companies to ask themselves the following:
Can current finances continue to support operations?
How can the company remain proactive in talking to lenders about upcoming cash-flow issues?
It’s better to ask lenders for permission early on than to ask for forgiveness later. Businesses should use their 13-week cash flow documentation to support their interactions with lenders and attempts to increase existing credit facilities. Businesses can also consider alternative sources of capital like non-bank lenders, junior capital, structured equity, and minority equity. They should consider if their current lender is the best option to get through the coming challenges.
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