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COVID revival planning: Tips and tools to build a cash flow war chest

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
08 October 2020 2 minute readShare

A small-business expert is urging business owners to keep their eyes on the future and has suggested that a cash flow forecast and a cash war chest should be part of every business’s revival plan.

Speaking exclusively during MyBusiness Week, Stuart Donaldson, the founder of Banyan Co, explained the importance of post-pandemic planning to ensure business survival.

“You have to learn to dance in the rain,” said Mr Donaldson, opining that the current environment is not going to disappear, instead it could persist for a decade, making it all the more important for business owners to adapt to changing circumstances.

“Every business needs a cash flow forecast,” Mr Donaldson continued.

“In the context of the environment we find ourselves in, it has never been more important.”

He explained that this can be done in two ways, a rolling 13-week cash flow plan or a bog-standard 12–24 months, monthly plan.

“This depends on where you are in business. If you’re heavily impacted by this whole COVID-19 pandemic, then you’re most likely going to need to have the weekly rolling forecast. You need to be viewing it daily and updating it, revising it,” he said.

“If it’s more conventional for you, and yes, there is some impact but it is not dramatic, then I would suggest the 12–24 months plan.”

He underpinned the importance of building a “cash war chest” by either pivoting, accessing the government’s cash flow boost initiatives and grants, or managing expenses.

“All of us as business owners are familiar with the term cash burn. I’m suggesting we turn that on its head by building a cash runway. We want to be able to stretch our cash as far as we possibly can,” Mr Donaldson said.

To do this, he advised businesses to take a closer look at the ATO support available, to explore debtor and creditor negotiations, short-term funding, lender and landlord deferrals, and the SME guarantee loan scheme.

“We’ve got to explore all options,” Mr Donaldson said.

“In my view, one of the most important things you can do right now is you can communicate with all stakeholders. If your business is suffering and you need to have as much cash as you possibly can, then I would suggest you pick up the phone and you talk to all of those key stakeholders.

“Ring you debtors, seek their support, explain your situation. Explore refinancing options, have you got capacity within your balance sheet to do this. Seek loan relief and deferrals through the banks, and obviously leasing and landlord support.”

At this stage, businesses will be able to determine what their recovery may look like.

“We do our cash flow modelling, we peer into the future and we understand how long we’ve got in weeks or months of available cash and what we’re going to do to build our sales to get us through this and survive and prosper,” Mr Donaldson said.

For more information on cash flow planning and tips to forecasting in uncertain times, click here for Stuart’s MyBusiness Week session.

COVID revival planning: Tips and tools to build a cash flow war chest
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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