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The ability to manage cash flow is fundamental to your company's financial health. When your business faces a crisis, your command of working capital becomes both critical and considerably more difficult.

Having control over your business’ cash flow and visibility of its future position can help you emerge from the pandemic and move forward.

Assess Your Cash Flow: Know Where You Stand

Anytime your business faces a crisis, it’s important to assess the impact of the situation as soon as possible — and as comprehensively as possible — so that you know where you stand. Consider these areas of impact to focus on right now:

  • Your short- and long-term cash position. In simple terms, your future cash position is an assessment of what you have today, plus what is expected to come in, less what is expected to go out. In ordinary times, future cash forecasting is a relatively straightforward exercise, particularly if you’ve been in business for some time. You know the rhythm of your business and your industry. In times of economic uncertainty, however, that rhythm goes out the window and forecasting your short- and long-term cash position becomes more challenging.

The best way to get a sense of your future cash is to run a sensitivity analysis, including a number of different scenarios. It’s “What If” planning that can help you prepare for whatever the future brings. For example:

What if you can collect all existing receivables, but you don’t add new revenue in the short-term?

What if you can collect all existing receivables and you continue to earn contracted revenue?

What if some of your receivables come in late or don’t come in at all?

  • Your Payables. While it might feel like much of the world continues to slowly churn, your business still has a responsibility to pay suppliers, staff, rent, insurance and equipment/ automotive leases. There are two keys to maintaining as healthy a cash position as possible: Organize and Prioritize.
  • Your Receivables. You have witnessed the impact of COVID-19 on your receivables: New sales may be harder to come by, and existing customers may be slower to pay. While you may already have a clear view of what is expected to come in, at this time it’s important to look at it with a lens of the financial health of your clients. Will they be able to pay? If they are struggling, can you offer deferrals to ease the crunch for them?
  • Your Supply Chain. What impact has there been to your ability to produce or purchase product? Will suppliers be in a position to continue delivering the necessary items to manufacturers? Will manufacturers be able to maintain the productivity levels required to deliver goods to you?


Four Strategies to Optimize Your Cash Flow During Uncertainty

Once you have assessed the continued impact of the pandemic on your business and know where you stand, consider actions that could help control the flow of funds in and out of your company. And this flow is what is going to allow your business to not only endure uncertainty but push forward once it’s over.

If you're negotiating or bidding on contracts or have a potential project in the pipeline, it may be worth connecting with RBC's Business Banking team for expert financial advice.

1. Digitize your payments

Offering digital payment methods can help you get funds into your business faster. Credit and debit card payments, and mobile payment options enable you to speed up the finality of payment. Digital payment options also minimize fraud and make reconciling your accounts faster and easier. Consider solutions such as RBC’s Merchant Services.

2. Optimize your payables

There are a few ways you can keep cash in your business longer when it comes to your payables.

  • Payroll. Employee wages and benefits deserve the most attention from you right now. Your top priority is to take care of your people and your community, so it’s worth exploring options that can help you avoid layoffs. Consider temporary reductions in hours, asking employees to defer or reduce pay, or accept equity in lieu of cash. If applicable, you may consider asking founders to set an example by reducing or eliminating their wages first.
  • Electronic Payments. When you can pay vendors, suppliers or taxes by electronic means, you need to have cash in hand only at the moment of payment — not before. By avoiding paper-based payment vehicles (i.e., cheques) the amount of time you need to have cash in your account is minimal.
  • Prioritization / Deferment. As you evaluate the payments you need to make, determine which suppliers are mission-critical to the success of your business and reach out to them first. Discuss the opportunity for partial payments or dynamic discounting if you can pay on time. Explore options for deferred payments and see if you can work out payment plans that work for everyone. Keep in mind, the relationships you have with your suppliers are extremely important right now, and the trust you have built up with them will go a long way. Approaching discussions with empathy and understanding will help more businesses get through these times together.


3. Proactively manage your receivables

As you evaluate the money that’s due to come in, it’s important to proactively engage with your customers to find out how they’re doing, and how likely they are to be able to pay on time. Be sure to prioritize customers with large balances, and work together to build a payment plan that is achievable for them.

Consider offering discounts for shorter payment terms, partial payments, or real-time payments such as credit cards or direct deposit transactions. Remember, regularly monitoring outstanding accounts will help eliminate surprises, keep cash coming in faster, and take action on balances that slide past their due dates.

4. Get creative with your inventory

Many industries are experiencing supply chain disruptions these days, so it’s more vital than ever to know what you have in stock. Increasing the frequency of your inventory counts could help you understand what materials are running low so you can quickly reorder (and maybe order more than usual).

At the same time, get an understanding of what’s moving and what’s not. Customer needs have changed dramatically at this time, so even if you’re running low in one area, if the demand isn’t there, it’s worth focusing on materials that are currently more sought after.

The importance of cash flow has never been in question. Positive cash flow is essential to the current and future success of your business.

While the way in which you do business may have changed – at least in the short-term – the life you have breathed into your business is still there. To move forward out of a crisis, it’s important to assess where you stand and implement and/or adjust cash flow strategies that are unique to this moment in time.

While information presented here is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. If you have further questions and are an RBC business banking client, please visit us at for the local contact to speak to an RBC Specialist.