Disaster Preparedness Finance Strategy

‘Cash flow is king.’ Be proactive, not reactive, to save your business

This month on Growbiz, we have been looking at smart strategies for generating and managing your cash flow during this crisis. As we have pointed out, to effectively manage cash flow, you need to go line by line and dig deep in all the areas of the business – sales, operations, accounts receivables, inventories, accounts payable, expenditures etc. It’s an exercise that needs to be done regularly – weekly or at least monthly — not just in a crisis. Now it is more important than ever, with small business survival hanging in the balance.

We’ve looked at ways to bring more cash into the door, including pivoting your business and adding revenue streams. You can read those posts here and here. Today we will dive deeper into controlling expenses, managing accounts payable and in general holding onto cash you have. Our expert is Raju Mohandas, a business consultant for Florida SBDC at FIU, the small business development center within the university’s College of Business. Mohandas brings years of experience as an entrepreneur, a CFO, a turnaround specialist and a business mentor. Lately, he has been working with a number of clients on cash flow, more important than ever when revenues are down so much because of the pandemic and there is so much uncertainty about the future.

Today we are discussing some topics that we don’t like to talk about – making the tough cuts, even the possibility of laying off or furloughing employees. It is a reality when revenue coming is only 50% or 25% or even less than where it was pre-COVID.


Layoffs and furloughs may be necessary but ideally you want to try to protect your best employees if you can so you have them when business comes back. This could involve asking employees to take temporary hours cuts or pay cuts. It’s an opportunity to drop under-performers, and hire better performers when you are able. “You want to use this moment to rethink and reorganize so you have something to come back to that you can build upon,” Mohandas said.

Go line by line and assess every expense. You may think you have already cut expenses and deferred capital expenditures wherever you can, but think again. Is there a subscriptions or other services you can do without for the time being? Do you need the cable TV service if your bar is closed?   Question everything. Formalize your procurement process with more CEO oversight, and consider rewarding team members who can find creative savings.

Next, try to renegotiate everything you can. That starts with the big ticket items – rent and debt – but also look at everything else. This may be the time to try to cash in on the relationship capital you have been building with your vendors and suppliers.


Renegotiate rents and other contracts if you can. Some of Mohandas’ clients have worked out deals for a lower rent for a limited period of time but also agreeing to a lease extension. Another client negotiated a lower rent but also a percentage of sales when the business reaches a certain level of business.

Another big one is trying to restructure the terms of your bank debt. Banks are finding themselves in the position of needing to do this again, something they haven’t experienced much since the Great Recession.

Negotiation is about making the other side understand that if your business succeeds it’s a win-win because it also helps them. The landlord keeps a long-term business. The same goes for vendors. Some of Mohandas’ clients are cash flow positive again because they successfully renegotiated terms.

All of this is happening while operating costs are increasing for many small businesses. Expect your insurance premiums to go up, for instance. So as you go line by line, you have to ask yourself, what does each decision cost and the benefit that it will bring?


  • Control your purchases and pace your payments: We’re looking for inventory turnover to increase, so purchase inventory and supplies in smaller quantities if you can, while still trying to hold on to your volume discount. Often the vendor will work with you because they are in the same boat – it’s a domino effect.
  • On accounts payable, obviously you want extended credit terms but the other side is in the same boat. The idea is with inventories turning over quicker, hopefully it will make your accounts payable easier. Although Mohandas is not a fan of credit cards generally, this may be the time to use them if you are sure you can pay it off at the end of the 30 days. The idea is to stretch the dollars out as much as possible.
  • If you have to buy equipment, consider leasing it instead. Get a separate loan for that equipment if you can, rather than using your working capital from an EIDL loan which you need to carry you for the 3 or 6 months, Mohandas said. “Right now any working capital from a lender is very, very tight. The credit market has tightened up.”
  • As soon as you are beginning to get back on track, begin building up a reserve account that will cover you for several months. “We don’t know when this thing is going to end, how long it is going to go, what the winter will bring… Let’s create that reserve now,” Mohandas said


“Most small businesses are reactive, but the key is to be proactive,” Mohandas said. “Let’s look down the road for what can happen [such as a second wave of COVID] and start creating reserves, cutting expenses, manage productivity, work on accounts payable, accounts receivable, your margins. You have to be proactive. We know it is coming, we don’t know how bad it is going to be. “

You also have to keep on top of it. Consultants like Mohandas and  other small business experts at Florida SBDC at FIU can provide that third-party review of your business and help you stay accountable. “Businesses should take advantage of the knowledge that we bring at no cost to them. We don’t have a magic ball but we all have been through a few crises as business owners or professionals,” said Mohandas, adding that the 17 consultants all bring different expertise to the table.

In summary, “cash flow is king.” Mohandas said. “Learn to retain your customers and look into what value added you can do for them now.  Then you look for increasing sales beyond those customers. Then make sure your inventories and accounts receivables don’t get out of hand.”

You have to be diligent. Time is not on your side.


Healthy cash flow keeps your business afloat. Here’s how to manage it.

Smart strategies for generating cash flow – in times of COVID and always

Cash flow: It’s not sexy but it is the bleeding heart of your business. Here are 5 ways to keep it healthy

From adding revenue streams to pivoting hard, small businesses take action to survive – and thrive again. Learn from their stories.

How to reinvent your small business for ‘the new normal’

Please send GrowBiz topic suggestions and feedback to GrowBiz@FIU.EDU.

Leave a Comment