Innovate Forward #4: Cash is King — Effectively Managing Cash Flow Through a Pandemic

INNOVATE FORWARD #4 with Dixie McCurley
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Why is a Strategic Advisor Essential For Companies During a Crisis, and What’s the Cost of Not Seeing BlindSpots?

One of the most valuable resources companies can have during a crisis is an advisor on retainer. By having a guiding firm (like Trusted CFO Solutions) available on the spot, clients can focus on their growth while mitigating their risks.

Since growth mode tends to produce new sources of cash (not necessarily profitable income), many businesses make faulty decisions based on this rapidly increasing revenue without understanding the expenses that are truly funding the operations and potentially making the bottom line unprofitable.

For example, sometimes you have a cash cow company (or department) that’s funding the other company (or department). For restaurant chains, the first restaurant is the cash cow. When they open the second location, it sucks a lot of cash from the first one, and it’s not profitable. It doesn’t throw off new cash for about six months.

The cash flow statement shows what’s really going on, and it illuminates the health of your company. It’s not always apparent to operations that the company has been burning through cash while not intaking it appropriately to match.

How Quickly Can Crisis Happen? 

The undoing can be rapid. If you miss the signs, it can quickly lead to an unexpected bankruptcy for your business. The pandemic is further accelerating the process for both struggling and growing companies.

After a season of growth mode with an abundance of cash coming in and operations sucking it out, the sudden stop or decrease in growth cash fosters a crisis because the operation’s failures are now fully exposed and there is little time or resources to right the ship.

An available strategic financial adviser informs you of this impending issue and helps the business by cutting the right expenses to prevent or minimize the negative consequences.

What Is The Differentiator Between Success and Failure During This Pandemic?

The habits from experiencing past crises.

Our short and long term planning efforts are showing us which companies are healthy. It turns out, companies who have been through a crisis before are the ones that learned and are ready for the challenges we’re now facing. For example, it could be companies that went through the 2008 financial crisis or survived the BP oil spill (when revenues dropped dramatically).

These companies had six months of cash reserves (even when they had their highest revenues during 2019) when this pandemic hit and aren’t worried about the uncertainty (like companies on the brink of failure). Those who have gone through hard times before have prepared and also brought on an advisor to guide them. They understand that if a downturn has happened before, it can always happen again, even in high levels of success and growth.

Let Us Help — We’ve Been Through Crises With Others

We’ve been through countless crises, and this experience informs how we can help clients who are not as sophisticated as they should be. Sophistication is not necessarily needed in the growth mode because growth is all about driving sales. Instead, complex visibility and decision making are required in operations to be profitable.

If there is a downturn in the economy or a slowdown in whatever product you’re selling, it’s a challenge to face. But, when there is an additional economic downturn, it’s of great value to your company to have a strategic advisor help navigate the uncertainty.

  • What if sales dropped way below expectations?
  • What if you have another down year after this one?
  • How can you plan for that? How can you build reserves?
  • How can you cut margins?
  • How can you cut direct or indirect costs?

If you want guidance establishing clarity for your company amid the crisis, contact us today.

Additional Resources

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About Dixie McCurley — Co-Founder of Trusted CFO Solutions

dixie mccurley holding financial leader of the year award

Never able to fully identify with the stuffy title of “accountant”, Dixie McCurley set out to revolutionize accounting practices for small- to medium-sized businesses by offering a new way of thinking about the process. With a unique method that capitalizes upon the latest technology, she walks each client through their pain points. In 2019, she was awarded the Financial Leader of the Year award for innovative solutions in finance.
Click here to learn more about Dixie.

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