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Spokane, Washington  Est. May 19, 1883

BBB Tip of the Week: Finance fundamentals for shifting to survival mode

By Tyler Russell BBB Northwest and Pacific

This is not business as usual. Increasingly heightened stay-at-home orders have turned shoppers into shut-ins, forcing businesses to drastically alter their operations in an effort to survive. As members of every industry make moves to stay afloat, the most critical actions your business can take may be ones made to your budget.

Financial expert Terry Frisk has more than three decades of experience helping small and medium-size businesses navigate both good and challenging times in the economy. Now a partner with B2B CFO in Meridian, Idaho, Frisk knows there are immediate steps for businesses to take to lessen damage incurred during the pandemic.

“The most important thing right now is for businesses to conserve cash,” Frisk said. “When times are good, businesses focus on bottom line profitability, but now the focus needs to be on cash. That’s a little bit different.”

Cash flowing into businesses normally arrives from three primary sources: lenders, investors and profits generated from the operation of the business. Right now, the operations-dependent portion of that trinity is affected. Customers are having a more difficult, or at least different, experience accessing services. Those hurdles lead to less cash flow and, as Frisk explains, create a cause for action.

“Business owners say, ‘If I’m profitable, then I’m bringing in cash, right?’ Well, no, not necessarily, because there’s a lot of other factors that come into play on the balance sheet,” Frisk said. “You have to watch accounts receivable, for example. If you’re in a business that offers open terms to customers, you have to watch that closely because those customers may be slowing down payments.”

The same goes for inventory. Businesses are better positioned to preserve their cash when they recognize a slowdown is coming and cut back on supply purchases.

“If you build up a big inventory, even if you’re not losing money, it’s going to be a big cash outlay that you can ill afford at this point in time,” Frisk said.

Those cash-saving measures should come as part of a larger effort to project various outcomes for your business. Looking ahead to the next 60 days, Frisk recommends creating a best case, medium case and worst case forecast for your operation. Yes, that’s a tall task given the unpredictability of the economy, but it’s vital to determining whether your business has the resources to endure a crisis that may last weeks or longer.

If your forecast reveals your business may not have those resources, there is some recourse for weathering the storm. Small business loans and other financial assistance options are being offered at both the state and federal level. Additional funds may also be available as a result of the tax filing deadline being extended to July 15.

Businesses also have the option of accessing a tool that has become increasingly valuable: communication.

“Communicate in every direction,” Frisk said. “Communicate with your employees because they’re nervous about the situation and what’s going to happen. Communicate with vendors about what they’re anticipating. Coordinate these efforts to make plans for how best to respond to not only your business needs, but their needs as well. It’s going to take a team effort.”

Those conversations should extend to other partners, too. Including those connected to financial institutions. Frisk said banks are getting ready to offer extended terms on loans as well as other deferral options. Finding out from your bank if those opportunities are available could be the difference between closing your doors and keeping the lights on.

The same is true for pairing tenacity with innovation. Frisk said he’s already seeing businesses reformat their operations to meet customer needs within a changing marketplace. A craft brewery, for example, shifted its focus to delivering packaged and canned products after restaurants and bars were ordered to close in its area. The alternative for businesses that don’t make similar alterations may be dire.

“You can’t just throw up your hands and say, ‘It is what it is.’” Frisk said. “You need to get creative. You need to think about the different solutions to help keep your business operating through these circumstances.”

More information and resources helping your business navigate through trying times is available by visiting trust-bbb.org/COVID-19.