In the midst of the crisis, managers are facing tough choices such as whether to furlough staff or even mothball the business. Diane Cheesebrough, who has over 20 years’ experience as a business leader and board member, explains how to make sound but fair decisions.
Cash is key right now. The old adage - turnover is vanity, profit is sanity but cash is king - has never been more appropriate. Managers need to ask, how can I conserve cash, how quickly will it run out and how can I make it last longer? This will be a change of mindset for many firms as they will need to switch focus from long-term growth to short-term survival. The key is to get the business through the crisis in best shape and with enough in the bank to give a ‘push off’ at the end.
Create cashflow forecasts. Model two scenarios – what you expect to happen and the worst case where revenue dries up altogether. Start by creating a forecast for three months, then extend it to six and nine months and update it at least once or twice a week.
- Draw up a list of debtors. They are likely to fall into three categories – government bodies which will pay, those which might have to extend payment terms and others that might go under altogether.
- List your outgoings – split them between operating and non-operating costs, and scrutinise every single one. Seek payment holidays or extend terms, furlough staff, stop direct debits and pay manually if need be, but protect key suppliers where possible. Amend the forecast to include those mitigations which are agreed but put the others in a separate section. After each section keep a running total and use this picture to frame your decisions. It is vital that you have the resources to get through the crisis and can see any problems coming.
- Consider other options. Could you stop some activities and focus on one product, or mothball the business altogether? Even if you don’t need them right now, it is useful to have a list of ideas in the event of another phase of lockdown.
- Ask what staff the business needs. If it exceeds cashflow, consider multiskilling –could the directors do the credit control? Making decisions like these is tough but taking a step by step approach - producing cashflow forecasts, profit and loss and a people plan – is the best and fairest way to do it.
Watch the video to learn more from Diane about how to cut costs, make decisions on staffing and other practical steps you can take to save your business.
About Diane - Diane is a driven, entrepreneurial, commercial 20+ year experienced business leader Chairman, CEO / MD and NED with a proven international track record of identifying, leading, facilitating and driving above trend profitable growth across PE, SME, Member, PLC and Public sectors.