As the world embraces a new disruption in Covid-19, many agencies will be planning for survival.
One thing which will be impacted quite quickly for many companies over the coming months will be ‘cash’. As clients pull back on work due to the uncertainties, some businesses may end up being cash flow challenged faster than they think.
Here are 10 things agencies should consider when it comes to managing cash during uncertain times.
Ensure you always have at least 6 months of cash reserves available against your monthly expenses burn, to get you through the tough months. This should be the case at all times, not just when there is a worldwide pandemic.
If your cash reserves are insufficient, you will need funding and/or some form of credit to get you through the months ahead. Apply now! Don’t wait until the last second. Talk to your banks about loans/overdrafts/credit cards now if you think you will need extra help. Take advantage of the low interest rates currently in the UK.
Discuss the option of a loan from the company’s shareholders to help shore up cash flow.
Talk to landlords and negotiate a reduced monthly payment plan on rent and service charges for a few months. Talk to your local council about a revised business rates payment plan.
Make sure you are getting paid on time for any outstanding invoices you may have with clients. Particularly if they are owed to you by large businesses.
Ask as many suppliers as you can for extended payment terms. Many will say “no”, particularly if they are small companies themselves, but if you don’t ask you don’t get.
Cut spending. Particularly on discretionary and non-business critical expenses, at least until things start to improve.
Salary is usually the biggest overhead of any agency. If work is really drying up, ask your teams if they are willing to consider reducing working days for say a period of 3 months e.g. from 5 to 4 days. Offering unpaid sabbatical is also an option, although not always practical if you are a very small team.
If things really get bad and you are unable to pay staff, you may need to face the inevitable and let people go. Think of it as an opportunity to take a hard look at your talent base and ensure you have the right team to see you through the current blip and then back into growth in the future. Restructure if necessary. A consideration for retaining key talent, when cash is low and paying salary is near enough impossible, is offering sweat equity in the business.
Quick wins. What else can you sell now if your core offer is suffering due to the current conditions? What else can your teams offer through your business that will help you get some baseline cash quickly through the door in the current climate? How can you diversify at speed? Figure it out. And fast.
Cash really is king during turbulent times. Be sensible and stay on top of your money. Keep cash flow projections updated at least every couple of days. You will be in a better position to make informed decisions about what you can afford as your business experiences the challenges that come with the volatility of uncertainty.