Cash is King

Conserving cash is a crucial financial strategy for businesses, especially during challenging economic times or when planning for future investments. Here are several ways a business can conserve cash:

  1. Improve Cash Flow Management:

    • Accelerate Receivables: Encourage customers to pay invoices promptly and offer discounts for early payments.

    • Extend Payables: Negotiate favorable payment terms with suppliers, allowing more time to settle outstanding bills.

    • Monitor Cash Flow: Regularly review cash flow statements to identify patterns and optimize cash management.

  2. Reduce Operating Expenses:

    • Evaluate Costs: Conduct a thorough cost analysis to identify non-essential expenses that can be trimmed or eliminated.

    • Renegotiate Contracts: Revisit vendor contracts and lease agreements to negotiate better terms or consider alternative providers.

    • Implement Cost Control Measures: Enforce strict spending policies and approval processes to prevent unnecessary expenditures.

  3. Inventory Management:

    • Optimize Inventory Levels: Avoid overstocking and regularly review inventory to reduce carrying costs.

    • Implement Just-in-Time (JIT): Adopt JIT inventory management to minimize excess inventory and improve cash flow.

  4. Defer Capital Expenditures:

    • Postpone Non-Essential Investments: Delay capital expenditures and non-urgent projects to free up cash for immediate needs.

    • Consider Leasing: Explore leasing or renting options for equipment instead of purchasing outright.

  5. Explore Financing Options:

    • Use Lines of Credit: Utilize lines of credit or revolving credit facilities when necessary, rather than tapping into cash reserves.

    • Refinance Debt: Refinance existing loans or debts to lower interest rates and reduce monthly payments.

  6. Optimize Cash Reserves:

    • Invest Surplus Cash: Invest idle cash in low-risk, interest-bearing accounts or short-term investments to earn some return.

    • Set Up a Cash Reserve Policy: Establish a policy for maintaining a minimum cash reserve to cover essential expenses.

  7. Revenue Generation:

    • Diversify Income Streams: Explore additional revenue sources, such as new products or services, to increase income.

    • Incentivize Sales: Implement incentive programs for sales teams to boost revenue without significant upfront costs.

  8. Personnel Management:

    • Cross-Train Employees: Cross-train staff to handle multiple roles, reducing the need for additional hiring.

    • Consider Remote Work: Evaluate the feasibility of remote work options to reduce office-related costs.

  9. Tax Planning:

    • Maximize Tax Deductions: Optimize tax planning to take advantage of available deductions and credits.

    • Stay Compliant: Avoid penalties and interest by ensuring timely tax filings and payments.

  10. Emergency Funds:

    • Establish an Emergency Fund: Create a dedicated fund to cover unexpected expenses, reducing the strain on daily operations.

  11. Vendor Negotiations:

    • Collaborate with Suppliers: Work closely with suppliers to negotiate better terms, discounts, or favorable payment arrangements.

  12. Contingency Planning:

    • Develop a contingency plan for unforeseen circumstances, such as economic downturns or natural disasters.

  13. Cut Non-Essentials:

    • Assess all areas of the business and cut non-essential programs or initiatives.

  14. Implement Energy Efficiency Measures:

    • Reduce utility costs by implementing energy-efficient technologies and practices.

  15. Explore Digital Tools:

    • Utilize digital tools and software to streamline operations and reduce manual labor and associated costs.

Cash conservation is a continuous process that requires monitoring and adjustment. Regular financial analysis and close attention to the business's financial health are key to successfully preserving cash.

Labor Law Updates

It is always a good idea for employers to review their Employee Handbook at the beginning of each calendar year. Especially more so this year, as there are many new federal and state level laws, impacting employers of all sizes.

 Here are some items to consider and review with your HR professional.

 ·      New sick and family leave mandates brough on by the federal Families First Coronavirus Response Act (FFCRA) and similar acts put in place by some states, counties and cities across the United States;

·      New health and safety requirements for the workplace;

·      New anti-discrimination policies;

·      New policies regarding remote workers;

·      New minimum wage thresholds in some states.

Being in compliance with all labor laws and planning ahead is not only a good practice, but can prevent many labor disputes between employees and employers.

EBITDAC

The coronavirus crisis has spawned “ebitdac”, or earnings before interest, taxes, depreciation, amortisation — and coronavirus — where companies are adding back profits they say they would have made but for the pandemic. This type of financial reporting is misleading and dangerous. Companies should not use outside events, such as the Covid-19 pandemic, to adjust their earnings to “what-if” scenarios. Earnings are a concrete number and they must be presented in a true and clear form to shareholders