• Jackson Payne

Wolcott Consulting, a fractional CFO, shares 7 crisis-management strategies for small business

Wolcott Consulting recently published an article entitled "Sailing the Rough Seas of A Cash Crunch"

As small businesses struggle to stay in business during the COVID-19 health crisis, entrepreneurs in all industries are seeking guidance during this time of uncertainty. Wolcott Consulting, a fractional CFO, has recently published a blog article entitled "Sailing the Rough Seas of a Cash Crunch and Staying Afloat." The article provides small business owners with seven crisis-management strategies to help businesses proceed carefully as well as generate and manage cash.

1. Create a cash flow forecast.

During a crisis, entrepreneurs must see their company's complete financial state and trajectory in vivid detail. Informed decision making is crucial when difficult decisions need to be made. Wolcott Consulting recommends running a forecast weekly.

2. Curtail unnecessary spending.

A company budget and a monthly review of the profit and loss statement gives small business owners an advantage. They can identify hidden costs and implement an action plan with cost-reduction measures. Once these measures are implemented, examine every aspect of the company processes to see if they can be improved.

3. Hire an expert.

An item that should be added to the budget is the hiring of an experienced financial professional, such as a part-time CFO or a fractional CFO. A fractional CFO can provide fresh financial strategies, explain proven cash-management techniques, and help the company cost-effectively reach its fiscal goals. If additional investment is needed, the fractional CFO can review the ROI of these opportunities to ensure prompt payback.

4. Optimize working capital.

Seek out every opportunity to increase cash flow. Where are the company's liquid assets, and how fast can accounts receivable (AR) be collected? If there are outstanding ARs, invoices, or other unpaid customer debt, consider offering incentives such as early-pay discounts. In a crisis, cash is more important than profit margin. Also, optimize inventory turns to conserve cash flow, while being mindful of potential supply-chain disruptions. Confirm lead times and make sure that backlog inventory requirements are secured.

5. Be candid with lenders.

Negotiate with vendors to see if they will accept longer or more flexible terms or payment in installments. Creditors understand the current financial situation, so proactively engage with lenders by sharing the action plan and business forecast with them so that they can be part of the solution. Demonstrate an ability to manage credit capacity diligently.

6. Secure financing.

Lowering interest rates offer a prime opportunity to secure a line of credit. With financing options becoming available due to the COVID-19 response, companies may be eligible for small business loans from the federal government. In an emergency, financing invoices or "factoring" can provide constant access to positive cash flow. Think about the possibility of raising capital outside traditional lending institutions. Companies that have been more severely impacted can also apply for the SBA's Economic Injury Disaster Loan. Consider all options, and talk to a banker.

7. Review the backlog.

Monitor the backlog and make any necessary adjustments to avoid shrinkage resulting from unforeseen cancellations. Remain in regular contact with customers.

Wolcott Consulting is a fractional CFO that provides outsourced accounting and exit planning for small and mid-sized businesses. The firm's CFOs have diverse experience in multiple companies and decades of entrepreneurial experience, which offers a fresh and unique perspective and gives clients a true strategic partner that they can trust. By using the fractional model, Wolcott Consulting can provide expert services for less.

For more information about outsourced CFO services, visit the Wolcott Consulting website at https://www.wolcott-consulting.com. The office can be contacted by phone at 1 (866) 208-8456 or by email at info@wolcott-consulting.com.

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