Cash management is the most critical issue for businesses during a crisis.

What is consistent across the board – regardless of industry, size, or the extent of the impact from the pandemic and inflation – has been the critical refocus on the importance of cash flow and the general management and preservation of your cash.

Businesses need to do the work now to ensure they are prepared for the next stage and can emerge out of a survival mode ready to grow.

But what this means for each business is different.

Cash is critical to meeting current business “non-negotiables” – such as funding product materials, rent, wages and other operational expenditures. It’s also essential to support future plans – increasing stock levels, taking on more people and pursuing new opportunities.

Now is not the time to be complacent about cash flow. We’re being challenged in a way that many businesses owners may not have experienced before. However, before you can look outward, you need to look inward.

To prepare for future growth, we need to look at current cost reduction strategies, implement more optimised structures or employee schemes, tap into government incentives, recover overpaid taxes, consider new finance alternatives or undertake new cash generating initiatives.

There are a number of options available for how you can shore up your balance sheets and be successful in a challenging business environment.

Raising funds, reducing costs

If we take anything from the GFC, we know it can take many years before companies are comfortably back at pre-COVID levels. Public equity market raisings saw a four year period before recovery phase and Australian loans to the private sector required 42 months to achieve stability. Therefore, businesses cannot rely on traditional lending alone and must look to alternate avenues for raising funds.

  • Releasing excess levels of cash tied up in working capital can represent the cheapest form of finance available to a business.
  • Assessing the assets and equipment you need to operate your business can bring an immediate injection of cash with a divestment strategy.
  • Reviewing all expenses and creditor agreements can bring down the costs you have for doing business.

Tax incentives and recovery

Federal and State government relief measures and incentives have long been rolled back. Optimising your R&D investments, tapping into government grants and loans and managing your GST and indirect taxes, like stamp duty, fuel tax credits and payroll tax, can have a significant impact on a company’s cash flow – putting cash back into your business.

Alternate employee arrangements

Salaries are typically the highest cost to a business. There may be a temptation when times are hard to look at redundancies as a way to minimise that cost, however in the long term this will make it much harder for your business to rebound and should only be used as a last resort.

There are many other, more innovative ways, you can manage and optimise your workforce – keeping your talent pool and preparing your business to rebound faster when the time is right. Options to consider include reduced days, additional purchased leave, implementing employee share schemes, even reviewing tax efficiencies for how you mobilise your people. Are you right-sized for business survival and also recovery?

Factors affecting financial forecasting

Financial forecasting and reporting is complex at the best of times, and the last few years have made it even more difficult to look forward more than a few weeks into the future, let alone months or years.

Where to next?