Pandemic Best Practices: Cash Flow Management

Source: The Rosenberg Associates

The following includes excerpts, reproduced with permission, from a blog post by Marc Rosenberg.

The coronavirus crisis has cast a surreal cloud over every aspect of our lives. One of the biggest concerns at CPA firms is cash flow.

We talked with several managing partners over the past week to hear what they are doing to manage cash flow. Here are ten practices they are currently following:

1. Finish returns, bill clients, and collect. Ask for payments before completing e-file forms. Do your best to get invoices out and payments in before things get worse.
2. Apply for an increase on your credit line.
3. Consider keeping cash in savings instead of paying down existing credit line draws or discretionary costs.
4. Work with clients on payment terms as needed. Can they partial pay or work out a payment plan with you for now? Consider asking your higher-risk clients to make automated credit card payments.
5. Be prepared for fee negotiations. Hard-hit clients may ask for a price reduction. Are all your partners prepared for this?
6. Evaluate next steps. If you can’t carry existing salaries with existing headcount, is there room for an across the board cut?
7. Consider cutting overtime for hourly staff.
8. If there were any staff terminations looming, does it still make sense to keep them on for the next few weeks or months?
9. Reduce partner draws and/or guaranteed payments. Under no circumstances should firms borrow money to prop up partner compensation levels.
10. Look for opportunities. Are there opportunities for you to consult with clients on navigating the myriad of confusing new laws, limits and stimulus programs? Don’t forget to have a plan for how and when you’ll get paid for this work.

For the complete article, read “Managing Cash Flow:10 Tips from MPs.”

From The Rosenberg Associates blog, March 30, 2020, https://rosenbergassoc.com/blog/.