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Guidance for small businesses to overcome challenges like contracts, managing debt, cash flow, and other issues

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Question:
The economy is slowly reopening, but small businesses that were forced to temporarily close or scale back still have challenges related to debt, contracts, cash flow, and other issues. For advisors, what guidance are you giving clients about contracts, managing debt, and so on right now?

Answer:
As the economy reopens, businesses are faced with multiple financial issues. Clients are having issues with their vendors regarding everything from open invoices that have not been paid to delivery schedules that will not be met. In addition, the client is facing issues from its customers regarding collection of payments to timely delivery of goods and services.

The first thing a business should do is to determine their cash position by doing a cash forecast. This will allow the business to know what is available to them to negotiate with their vendors. Creditors will be more likely to modify a contract, or set-up a payment plan, if they are presented with a plan that shows what you are able to do. A change in payment terms may move a client to the top of a vendor’s delivery list.

At the same time, a client must be ready to work with its customers on payment plans and delivery schedules. Flexibility will result in a mutually beneficial outcome.

 

John Estill,
Optima Office Consulting CFO


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