Even during these uncertain times, we’re maintaining our commitment to helping move your business forward. So even though you may not be interacting with us face-to-face, we invite you to stay connected through our daily video updates. Current affairs are changing rapidly, and we’ll be discussing how news from Washington and the State House will affect businesses and helping to make sense of new legislation and announcements.
Our first video in this series come from Managing Partner John D. Geraci, CPA, MST. John shares a few suggestions business owners may want to consider while facing an unknown future. If cash flow and maintaining your workforce are your primary concerns, there are a few changes you can make now that could make a difference down the line.
Hi, this is John Geraci, the managing partner of LGA here again to talk to you about some of the things that you can do from a business perspective to sort of manage your way through, the unknown that we’re all facing as a result of COVID-19. And from a business fundamentals, we wanted to talk about three things, that you could be doing to get out in front of this to some extent. And the first thing is just making sure that you’re updating your financial modeling, whether it’s your budgets and forecast or your cash flow models. This is a good time to do a sensitivity analysis on some of that information and to try to make sure you can identify some financial and non-financial triggers that would make you do something to adjust your existing cost structure to accommodate what could be a fall off in revenue.
So that’s one thing that we’re advising our clients to do and of course we can help you with as well. Something else that you should be doing is really taking a look at your accounts payable cycle. Sometimes when business is good, we tend to get into a pattern of just paying bills as they come in. And it doesn’t necessarily lead to capitalizing on the terms that your vendors are providing you. So during a time like this, it’s super important to make sure that you’re focused on maximizing the terms and stretching those terms, what the uncertainty with respect to your inbound cash flows and also prioritizing your vendors so that you’re always paying the vendors that are absolutely essential to keeping your revenue cycle moving. And the last thing that we’re recommending is that you really take a look at the types of cuts that you can make to your cost structure that preserve human capital.
To the extent that you’ve spent a lot of time over the last few years, really building up a solid team and what’s been a very low unemployment rate market. It’s really important to try to do what you can to retain that team. So you need to look for opportunities to reduce costs that don’t necessarily result in layoffs to the extent that that’s possible. Some of the things that you could consider doing are freezing your 401k match or profit sharing plan. You of course want to speak to your third party administrator to make sure that you’re following the guidance with respect to how you need to notify your employees and what those time periods are. But that can help you with a current year expense and potentially current year cash flows. Worst case, it’s going to reduce your current year expense and save you cash flow next year. Even though we’re talking about saving cash flow potentially in 2021, that can still be very important to your, 2020 performance overall.
Something else you should look to do is maybe just reduce some discretionary spending on office perks to the extent that you’re buying your team meals or lunches or parties or events and celebrations. Those are some of the areas that you’d probably want to look at cutting back on before you necessarily reduce your staff. I think if you talk to most of your team members, their core focus right now is making sure that they can maintain their level of compensation as much as possible to sort of navigate through this on their own. And so they’ll be very understanding of the other things that you have to do to co cut your costs, to make sure that you can keep the staffing in place. So just some ideas that we wanted to share with all of you as you continue to navigate your way through this. Again, we’re going to have a series of these videos we’ll be putting out, so please check back on our YouTube page for more of these series.