管理現金難度

管理現金難度

In this article, author Stephen Priddle shares some tips from his e-learning course “Managing Through Cash Difficulties,” which is offered through CPABC’s PD program. He notes that the advice provided here must be implemented carefully—legal and other professional advice should be sought where advisable, and all relevant legislation must be followed.

COVID-19 impacts have put financial pressure on many businesses and not-for-profit organizations, especially in certain sectors, resulting in reduced revenues and cash pressures. And while the government has provided substantial funding assistance since the pandemic started, this support is now in sunset mode, which means more CPAs will likely have to help their employers or clients manage through cash difficulties.

Numerous other factors, including market change, competition, and bad management can also lead to cash difficulties, and most veteran CPAs have encountered and learned from these difficulties at one time or another. If you haven’t yet had to deal with such situations, it would serve you well to be prepared, as you’ll need to act quickly if or when the time comes.

Here are some tips and strategies from a veteran CPA who has been there and done that, both as a controller and as a CFO.

Be close to the business

In a cash crisis, finance’s role—getting cash in faster, managing payables and bank debt, and finding emergency financing—becomes even more important. Finally, we are appreciated! Being close to the business, looking for warning signs, and finding cash troughs in forecasts is vital, because the earlier you spot trouble, the better you can mitigate it.

Having a deep understanding of the business will also help you make informed decisions when it comes to temporary or permanent cost-cutting, which will likely be necessary. Do you cut gingerly, only to realize that bigger cuts are needed? Do you cut aggressively, only to find that you’ve seriously damaged the organization? You must weigh the short- and long-term benefits for your organization while factoring in its context.

Be accurate in your cash-flow forecasting

Once you’re into real cash difficulties, accurate cash-flow forecasting becomes imperative for meeting payroll needs and, indeed, for survival. There are no tools (software or otherwise) that can do this for you—you have to do it yourself on your own spreadsheet, starting with opening A/R and A/P from the accounting system data and a thorough understanding of the business variables. You may also need to do some scenario modelling. I recommend doing crisis cash-flow forecasting around payrolls, not around calendar periods like weeks or months.

Manage payables and suppliers

Managing payables is an extremely important and, frankly, underrated factor when it comes to managing cash difficulties. Payments must be managed in view of business criticality—primarily, you need to determine which payments can drive new cash inflows and which must be paid to keep the business out of serious trouble. Key suppliers must be contacted, and these relationships must be managed very carefully.

Communicate with employees

Amid cash difficulties, it’s important for employees to understand that tough decisions will have to be made if costs exceed revenues (which are being maximized as much as possible) and that payroll is a significant portion of said costs. Difficult steps will be easier to take if senior management and/or the business owner have previously established a good and trusting relationship with employees.

If you have to make payroll cuts, start with those that will be least painful for the workforce. Low performers will have to go—keeping them will only demoralize your better performers. End the contracts of redundant term employees and contractors that can be ended without penalty. Minimize the hours of employees with flexible hours to the greatest extent possible. Accept voluntary leaves of absence for school, family, or other reasons. Share or ease employees’ pain by accessing the federal Work-Sharing Program.

Next, “buy” pay cuts from employees with future conditional bonuses, shares, or stock options. Make sure everybody knows that the senior executives are volunteering for the biggest cuts. You may need to volunteer for a major cut as well—perhaps to zero! If still more cuts are needed, you will then be left with permanent and temporary layoffs (where permitted). At this point, you’ll need to determine who is really needed and make wise decisions with other senior managers.

Don’t forget the board

Members of your board of directors are on the hook for items like source deductions, unpaid GST, and wages, so be sure to keep them apprised of their risks with a periodic schedule of such items.

Manage financing sources

If banks and existing financing sources are available, these relationships must be managed carefully. For example, you should forecast and pre-empt covenants violations by discussing them in advance with your bank and negotiating wisely. Don’t just approach your bank with problems—come with potential solutions as well.

Accessing earlier and more money from customers is even better than obtaining financing from the bank or other sources. Don’t be afraid to negotiate the restructuring of existing agreements and contracts for these purposes.

If you find that you need to seek emergency financing sources, only borrow if doing so makes sense—if there is hope for bridging or another specific purpose—because these options tend to have a high-financing cost due to the risk involved. Look first to existing shareholders—will they, for example, put in new money or guarantee loans? In addition, sale and leaseback financing is a way of accessing hidden equity in a business, and a strategic investor may be able to provide an infusion of cash.

Uphold ethical standards

CPA ethical standards must be upheld throughout, even though there may be pressure to bend the rules to save the organization. Ultimately, if it looks like the organization isn’t going to survive, you should consider talking to a licensed insolvency trustee and/or finding a new employer.

 

 

 

 

Stephen Priddle, CPA, CA, CMA, is the CFO and director of the SureWx group of companies, a global aviation systems business. He is also the president of Practical PD, Seminars for Accountants, and the creator of nine PD courses, some of which are offered by CPABC.

This article was originally published in the November/December 2021 issue of CPABC in Focus.