As professionals, we all need to do our part in assisting others endure these times. In an effort to minimize financial challenges for those affected by the current crisis, I am promoting awareness of Excel-based monthly/weekly cashflow modeling tools and the need for their use.
Small and medium-sized busineses (SMEs) have limited exposure addressing critical once-in-a-lifetime working capital related issues. Inability to do so WILL lead to catastrophic business failures. Bank credit concessions and government-backed loans are important components of the solution BUT ensuring that these scarce monetary resources are deployed appropriately is paramount to stabilization efforts and an effective re-start/recovery.
In my opinion, cash-stressed SMEs must address five fundamental questions in order to survive:
- How quickly is my working capital position eroding
- What protective measures can I take NOW to slow or stop that erosion
- Can my current business model been sustained through a prolonged downturn
- What additional working capital will I need to ramp back up again when prospects improve, and
- Where do I find those resources: internally, banks, government
Robust Excel-based cashflow models address these working capital related issues. At the outset, they are useful in securing new commercial loans and existing loan accommodations. Maintained regularly, they become an Early Warning System for potential cash crunches in the weeks and months ahead. Unlike annual Statements of Cashflows and accrual based monthly budget projections, these models are effective in simulating “what if” scenarios at the granular cash-based level. Models are typically customized to address each business’ particular circumstances and complexities.
SME business owners should be aware of these tools and how to use them.
For those looking for additional basic information: please see TWFCs - the Knife and Fork of Recessionary Survival
For those interested in obtaining assistance, feel free to connect with me
Be safe and stay well, best of success.
Greg Kuzminski FCPA FCGA