By Scott Danger, CPA CVA, and Marshall Miller, CPA

Cash Flow Beyond the PPP

The adage “cash is king” has lived in our corporate vernacular for decades. In these unprecedented times, it arguably holds more weight than ever before. As Paycheck Protection Program (PPP) loans run dry, many business owners are wondering what their cash flow will look like in the coming weeks and months. No one wants to find out what happens if the cash, too, begins to dry up.

Thankfully, you don’t have to live in this stressful state of limbo. It’s possible to peek into the future to estimate your business’ cash flow. And, no, you don’t need a crystal ball.

All you need is a cash flow projection.

A cash flow projection uses a combination of models and analyses to project, or forecast, your business’ cash flow at a given point in time. It’s a valuable business tool, even when times are good. It can be a lifesaver during times of uncertainty.

Here’s how a cash flow projection could benefit your business:

Respond to change more quickly.

The restaurant industry has been particularly hard hit by the COVID-19 pandemic. As a result, many restaurant owners are literally running their businesses week to week. The change in seasons and the end of outdoor dining has many wondering how—and if—they will be able to survive the Minnesota winter.

We recently worked with a restaurant owner who, like most restaurant owners, was doing everything in her business—from cutting checks to packing takeout orders. She knew she had enough cash to cover expenses for the next month, but she didn’t have the time or mental bandwidth to think about the month after. She saw only a question mark in her business’ future.

This is where we were able to help. We gathered historical numbers for sales, cost of sales, payroll and other expenses to establish a normal year for the restaurant. Then, we ran a cash flow projection off of these. Our projection accounted for a number of factors, including seasonal sales, debt payments, and, of course, COVID impacts. We tweaked our numbers based on the restaurant owner’s insights.

The result: A dynamic cash flow projection that lets the restaurant owner gauge her cash flow over the next several months. Armed with this information, she’ll be able to quickly make decisions about hiring, service models, and even operating hours if needed.

Make the best of opportunities—and tough situations.

The ability to dig into “what if” is the beauty of a cash flow projection. For example, you can run one projection based on running your business at 50% capacity, and another at 25%. By exploring “if this, then that,” you can proactively respond to whatever comes your way.

Know your cash flow.

We know brighter days are ahead, but we don’t know when we’ll see them. In the meantime, projecting your cash flow gives you the knowledge you need to make critical decisions. Our business advisors are available to help you not only with cash flow projections but also with determining your next steps. Based on your business’ cash flow projection, we can advise you on everything from where to cut costs to solutions for debt payments. We can also support you with our AEM Recovery Plan Services, which provide business owners with everything from cash flow projections to human resources support. To learn more, contact us today

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