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Grant Thornton: Focus On Cash Flow and Liquidity for COVID-19 Resilience
The accounting firm offers four things every business should do now to protect themselves from an impending recession.
As the coronavirus continues to wreak havoc on the economy, the question of a second recession in less than fifteen years has quickly changed from If to When. As businesses scramble and pivot to protect against themselves from the fallout, accounting firm Grant Thornton has offered four steps every business should take right now.
First, Grant Thornton recommends analyzing your cash flow and working capital needs.
Cash is the lifeblood of any business. In a volatile and slowing economy, getting an immediate handle on your daily cash needs is essential. Take a critical view of operations, review existing cash flow forecasting processes and understand how potential disruptions to operations may affect liquidity.
Next, businesses should get all costs under control.
Maintaining your current or historical levels of profitability in an environment where supply and demand fundamentals are decreasing simultaneously can be difficult without closely analyzing spending.
Third, evaluate customers and suppliers.
In times of economic uncertainty, businesses could see increased pressure on the purchasing power and credit-worthiness of customers while also facing tighter credit terms and product availability from suppliers.
Finally, businesses need to increase communications with their lenders.
Your existing lenders will likely know you and your business best. Communicate with them early and often, explaining any situations that may arise and the actions you propose to address them. Transparency and open communication will serve you both well. Your existing lender could be your fastest source of additional liquidity.
