7 steps to preserve your cash flow

The economic disruption caused by the COVID-19 pandemic has been sharp, steep and sudden. With significant portions of the business world either shuttered or forced to work remotely, revenue streams have been impacted across the board.

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Propane distributors are not immune to the slowdown. This makes it imperative that you take steps to monitor cash flow to help protect your propane business during the crisis so that you are in the best position when the next heating season arrives. Here are seven steps you can take to preserve your cash flow.

• Know your cash position. Prepare a detailed 13-week cash flow projection, adjusted for the new reality of the economic downturn. Make a “worst case/best case” assessment of revenue you can count on during the summer months. Look for ways you can reduce expenses without significantly damaging your company’s ability to prepare for next winter.
• Understand your “burn rate.” How quickly are you spending money? If you trim expenses and overhead, how long will your cash on hand last? Summer is often a time when propane revenues are lower, so knowing – and slowing – the pace at which money is flowing out will give you a better handle on how much you need to be bringing in.
• Make decisions and make them swiftly. Laying someone off is never easy, but it could be the difference in the survival of your business. Seasonal workers, such as delivery drivers, who you might normally try to keep working during the off season might have to be let go. You must protect the core of your business so that it will survive beyond the crisis.
• Accelerate receivables. Collecting the money owed to you paid sooner rather than later will improve your cash position. This applies to past due balances from the season just ended, including budget plan balances. Offer additional incentives to get customers to pay early, offer to accept credit card payments and be prompt in contacting customers who owe you money.
• Reach out to your creditors/vendors/landlords. From what we have seen, people understand what is going on and are trying to alleviate the burden as much as possible. A simple email to your landlord to work out an arrangement (such as deferred rent payments added to the end of the lease, or revised payment terms) could save you a significant amount of cash as you try to hunker down. Communication is key – don’t wait for them to contact you. If you own your own real estate, you can reach out to your bank about deferring mortgage payments until the crisis has passed.
• Identify expenses that can be temporarily paused or eliminated. Some recurring monthly expenses and subscriptions can be put on hold. Do you still need these services? Or can you make do without them for the time being? Find out from the supplier if you can pause these services and resume again when the economy recovers.
• Find new sources of cash. Contrary to some news reports, business across America has not come to a full halt. Entrepreneurial spirit is at an all-time high, and opportunities exist in the middle of any crisis. If you have been putting off a decision about diversifying your product line, now may be the perfect time. What additional skills and resources are within your capacity to offer to existing customers or which might appeal to new customers? Adapt to the current situation and you’ll find your business will come out stronger on the other side.

Jenna Rice is a manager in the Client Accounting & Advisory Services (CAAS) Practice Group at Gray, Gray & Gray.