Pragmatic, effective financial strategies to help position your business for success

Written by Yohaan Thommy, Partner at MNP 

This is a crucial time for business leaders to navigate carefully. Throughout this four-part series, we will provide you with current information, practical suggestions and helpful resources to keep your business on a safe pathway through disruption — and position it for accelerated success in our new economic and social environment. We will touch on the following topics:

1. Stretch cash flow
2. Reinforce revenue
3. Strengthen IT infrastructure
4. Demonstrate strong leadership

Part One: Preserving Cash Flow.

Demand for your products or services has shifted. Customers are delaying purchases of certain goods and services in favour of others that are more suited to their needs right now. Adapting to this shift means identifying the potential impacts on your cash flow. And then taking appropriate action to manage problems.

How to help prevent a cash flow crisis
Using your sales forecasts and our 13-week running cashflow template (download from the top of the page) as a guide, prepare weekly cash flow forecasts for at least the next three to eight months. This will help you understand your cash flow needs and determine how long your business can continue without burning through your working capital. Now you need to focus on strengthening cash flow.

Develop key supplier and strategies
To minimize supply chain disruptions, coordinate with key suppliers to ensure you can continue to meet the needs of your most valuable accounts. Communication and collaboration are essential, so create specific procedures to engage and retain these strategic partners. To preserve cash, manage payables carefully, prioritizing important strategic vendors when timing payments.

Continue to tap into government support programs
The federal and provincial government economic support programs are continuously changing and extending.  Some of the key measures for Canadian companies include:  

• Enhanced support through the Canada Account — Export Development Canada (EDC) will provide qualifying Canadian companies with increased access to loans, guarantees and insurance policies.
• Temporary wage subsidies for workers ­— The government has enhanced its original Canada Emergency Wage Subsidy (CEWS) supporting eligible employers facing revenue losses to help prevent layoffs. The changed program eliminates the requirement for a minimum 30-percent revenue decline and allows eligible employers with any reduction in revenue to obtain the wage subsidy. Eligibility to the program has been extended to November 21, 2020 (with intent to extend until December 31, 2020) and incorporates sliding scales to determine the amount of the subsidy based on need. The new CEWS rules are effective beginning July 5, 2020. The application deadline for the CEWS program has also been extended until January 31, 2021. 
• Tax payment deferrals — The Canada Revenue Agency (CRA) is allowing all businesses to defer the payment of any income tax amounts owing on or after March 18 and before September 2020 until September 30, 2020. The relief applies to both tax balances due and instalments under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period. As well, the CRA has waived interest on existing tax debts for April 1, 2020 to September 30, 2020. Interest on GST / HST returns are also waived for April 1, 2020 to June 30, 2020. Business owners should consider using this tax relief to preserve cash flow or build capacity as needed.
• Business Credit Availability Program (BCAP) ­— EDC and the Business Development Bank of Canada (BDC) will provide more than $10 billion of additional financing to businesses facing economic challenges caused by COVID-19. The program helps Canadian businesses in all sectors and regions access credit through EDC, BDC and private sector lenders.

Part Two: Reinforce Revenue

Time to be creative with revenue sources. Map out your best and worst-case scenarios ­(e.g. what if demand for a product or service swings by 40 percent?), then consider strategies to address these scenarios. Focus on how you can protect current sources of revenue, find alternative sources and creating new ones.

Lost revenue? Replace or add revenue streams
Consider ways to potentially diversify your revenue streams and find new profit opportunities. Regardless of your industry, there will be ways of providing goods and services that you haven’t yet considered. Consider replacing products / services which take longer to convert an order to cash (e.g. customization of a product that is leading to long lead times). Financial liquidity will become a key determinant to which products and services to take to market.

Instead of viewing current circumstances as surviving – pivot. For example, an MNP client in the medical sector who manufactures laundry management systems pivoted to producing easily sanitized stainless steel carts to meet more urgent needs in hospitals and clinics. For distribution companies with excess capacity, consider renting inventory space to manufacturers or other distributors in industries where sales are spiking.

Manufacturer? Re-tool with the government’s financial assistance.
Canada’s Plan to Mobilize Industry to fight COVID-19, is creating pathways to get domestic manufacturers and businesses the resources they need to help during this critical time. New measures will directly support a business’ ability to rapidly scale up production or re-tool manufacturing lines so they can develop products that will help in the fight against COVID-19. These products include critical health and safety supplies and equipment such as personal protective equipment, sanitization products, diagnostic and testing products and disease tracking technology. There will be fast-tracking of approvals to deploy funds on an accelerated basis. 

Product demand strain? Do a quick productivity improvement assessment.
For companies whose product demand has exponentially accelerated, such as food processing or medical manufacturing, conduct a quick productivity improvement assessment. Assess ways to run your processes with fewer resources (e.g. people, financing, working capital). Consider bringing in experts for a couple of days who can identify ways to quickly ramp up production, workforce and supply chain capacity. Invest only in what will deliver a fast payback and build the value of your company. Going forward, businesses that can operate with fewer key resources will be stronger and more resilient. 

Part Three: Strengthen IT Infrastructure

The pandemic highlights the importance of information technology, especially during periods of disruption when connectivity, information and data are even more critical. The right IT infrastructure can support a business on several critical levels, including operational efficiency, security and communication. It enables your business to be nimbler and enhances its value.

Following are some suggestions for how you can quickly and cost-effectively build and strengthen that infrastructure.

1. Use an efficient digital transformation strategy – Digital transformation involves changing the way your company creates and delivers value to customers. It requires rethinking the role and impact of information technology and how it relates to customer experience, operational agility, workforce enablement and culture.
2. Move data and applications to the cloud – Moving files and software to the cloud makes them more accessible without straining your business network infrastructure. The cloud also enables greater scalability, flexibility and security while strengthening your business continuity and disaster recovery capabilities. There are numerous public and private cloud providers which offer remote storage, computing and collaboration capabilities.
3. Maximize the output from remote workers – With the right technology and processes in place, remote teams can be extremely productive. The last few months have upgraded in the supports and tools that businesses of all sizes can now access. Remote workers also require security-related resources to adequately protect data and devices. For example, virtual private networks (VPNs) are necessary to provide secure, encrypted connections between devices when workers access the company network remotely.
4. Ramp up cyber security – Cyber attackers are taking advantage of global disruption; threats are becoming more frequent and intense. As companies work remotely, it’s critical that all workflows take information security into account.

For small and mid-size companies, outsourcing some or all aspects of cyber protection to a managed service partner can be a cost-effective solution. With operations centres staffed by experts around the clock, these act as an extension of a company’s team — helping to prevent, detect and respond to threats and mitigate risks before they cause major damage. Managed service providers can address any number of security processes, including compliance, management, administration, deployment and reporting

Part Four: Demonstrate Strong Leadership

All business leaders have a responsibility to support the economy within your realm of influence; locally, regionally, nationally and globally. This is the time to be a strong leader — thoughtful, shrewd, strategic. And a smart decision maker ­who is nimble in adapting to constant change. Connect with other business leaders to share knowledge, resources and connections. Communicate openly and honestly with employees, customers, partners and other stakeholders. As the capable leader of a company with solid infrastructure and human capital in place, you will be positioned for a trajectory of strong, sustainable growth when this storm passes. 

Help Your Community Thrive
In situations like these, it’s even more important for leaders to look beyond their immediate business challenges and question how they can support their greater community. Consider how you can leverage your resources and reach out to neighbours who may be in need, such as local food banks. 

Addtional Resources

Preparing Your Organization for Business Interruption From Covid-19

To learn more, contact your local MNP advisor today.

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