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Understand Your Cash Flow + Financial Options to Survive COVID-19

Clearly, many of the businesses in our community are struggling to survive right now. Those who think strategically and remain nimble will be in the best position to survive this crisis, and move quickly to capture opportunities as they emerge.

Right now (and arguably always) cash is king. Ensuring you have maximum liquidity is paramount, and in many instances requires an immediate strategic review of near-term outflows in order to prepare for a shutdown/slowdown with a currently undefined endpoint.

We know you have questions. We’ve provided answers to some frequently asked questions and are available to discuss your unique situation as soon as possible so we can help you formulate a plan.

What can I do right now?

The first piece of advice is to create an 8-12 week cash-flow forecast, including conservative revenue and collection assumptions and week-by-week expenses broken out by payee/vendor. This should include:

  • payroll;
  • payroll taxes;
  • other taxes;
  • debt service;
  • utilities;
  • suppliers;
  • rent payments; and
  • other expenditures.

This forecast should also include a creditor matrix, which is a simple document that lists all of your creditors, including critical information, such as (a) contact information, (b) account numbers, (c) reference numbers, and (d) balances owed. Similarly, you should keep a matrix that outlines all of your accounts receivable, including (a) who owes you money, (b) amounts owed, and (c) due dates / expected payment dates.

Organizing this information will allow you to make real-time decisions as circumstances evolve, taking into account appropriate operational and legal priorities.

Outside of my critical vendors and utilities, what else should I be prioritizing?

  • Trust Taxes - Under no circumstances should you use employee withholding tax or sales tax collected to fund other expenses. These “trust taxes” are not your money. They must be paid to the relevant governmental authority, and liability will extend to all “responsible parties” if these dollars are not properly remitted.
  • Insurance- Another common mistake is letting your insurance lapse, which could have serious legal and financial consequences. All businesses and their owners should keep their insurance up to date at all times, including commercial liability and D&O policies.
  • Tax Filings - Even if you are unable to pay your tax obligations, you should timely file all of your returns. This is an area to keep an eye on because regulations may be changing in response to the pandemic, but timely filing is critical to avoid unwanted scrutiny and additional penalties.

How do I know when it’s time to consider bankruptcy or restructuring as an option?

Typically, we don’t recommend filing for bankruptcy or receivership unless creditors have sued, won a judgment and are at the door to disrupt your operations. Until then, the business can freely negotiate with creditors. Most businesses are a long way away from that point in the current crisis, and the widespread (and likely cascading) nature of the crisis suggests that negotiated solutions will be the order of the day once the dust settles.

However, being organized and getting the right resources in place now will allow you to make strategic decisions that include ongoing consideration of all potential pathways.

How direct and transparent should I be with my stakeholders?

Don’t go out of your way to avoid conversations with creditors or employees, but be careful not to make commitments you can’t fulfill. The best way to deal with lenders and suppliers is to be honest, open, and non-committal. All of us understand that these times have no precedent and we’re all in this together. You will build credibility and enhance trust if you keep any commitments you make and stay in communication with the people who are integral to your operations.

What other options should I be considering?

Businesses throughout Ohio are approaching the pandemic in a number of different ways, which are all suited to their specific operations.

Other strategies to preserve cash and keep the creditors at bay can include direct negotiations with your creditors or more severe steps taken with your workforce, including layoffs, furloughs, or terminations. Those decisions bring different implications and can be complicated, so you should carefully consider how you will structure your remaining workforce as the decision will have important impacts on employees’ unemployment eligibility and benefit amounts.

Every day, the state and federal governments are announcing solutions and relief for workers and businesses, some of which will likely not be helpful as a practical matter, but some of which might . And although it won’t apply to many employers, the State of Ohio also has a SharedWork program that is available to employers who may otherwise be laying off their full-time hourly staff, subject to certain income criteria.

How can we help?

Bankruptcy is the last resort and we work to keep clients out of it by helping them restructure, reduce or workout their debt obligations with their creditors. This often begins with a process of prioritizing debt obligations and analyzing which creditors to pay, which to defer and which to approach with negotiations.

There are a number of other strategies that may make sense for you, and our team is available to discuss all potential options.


To recap, there are a number of key actions that should be taken by any business dealing with a serious financial hardship, considering restructuring or potentially facing a bankruptcy filing:

  1. Create an 8-12 week cash flow forecast and creditor matrix that can be updated quickly and easily.
  2. Make a detailed list of your AR and be cognizant of the likelihood that payment will be extended.
  3. Keep your insurance up to date.
  4. Timely file your taxes (even if you can’t pay the associated liability right now).
  5. Stay abreast of government programs and resources for struggling businesses, including SBA loans, as they come online in the coming days and weeks.
  6. Consider potential restructuring options in concert with your creditors and business advisors.
  7. Weigh different workforce reduction options.
  8. Prepare for a significant amount of work throughout the process.
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