As organizations throughout the United States continue to reduce operations, cancel events and go dark the old adage “cash is king” comes into clear focus. Many organizations, after only a couple of weeks of pandemic related closures, are left uncertain as to how long payroll can be met and when vendors can be paid. With these uncertain times it is critical for organizations to research and consider cash flow options and to develop an action plan to manage cash in both the short term and long term. This article will address some of the areas your organization can consider when developing a cash flow plan.
Operating Expenses - The first line of defense for the organization may well be to perform an assessment of the opportunities within your organization to determine non-essential or excessive expenditures as well as those that can be negotiated. Some areas to consider for containment might include:
Payroll – Although an anguishing decision, it might be necessary to make some difficult decisions related to payroll. Options run the gambit from a reduction in workforce, to furloughs to wage reductions or freezes. These decisions are as much financial as they are cultural. Before taking action we encourage you to consider all governmental and other financial assistance options available to you to preserve your workforce. In particular, the timing or duration of furloughs might impact SBA loan programs or unemployment compensation benefits.
Donors - Many organizations might think now is not the time to ask our donors for additional contributions, as the entire economy is having challenges. However there might be some options in this area, consider:
Ask donors to release restrictions on previous donations, for use in operations
Ask sponsors and ticket holders from cancelled events to convert their event payments to unrestricted gifts
Strategically approach your most loyal donor base to discuss options for an emergency gift
Approach long-term vendors, who might have excess inventory, for an in-kind gift
Contact community resources that are providing emergency aid, such as local foundations and the United Way
Research the Pittsburgh Foundation’s Emergency Action Fund or the Columbus Foundation Emergency Response Fund
Banking Relationships – Contact your financial institution. Banks are working to provide short-term and long-term solutions for their clients and the federal stimulus packages are providing opportunities for banks to assist. Some topics to discuss with your bank include:
SBA loan programs
Payment deferral options
Line of credit modifications to expand borrowing availability
Refinancing to capitalize on rate reductions
Leveraging owned real estate, without existing debt, to free up “trapped liquidity”
Governmental Programs – Federal, state and local governments have enacted several programs and others are still in negotiation. These relief packages are evolving quickly, but as of the time of this article, here are some areas for consideration
Employer payroll tax deferral
SBA emergency loans
Expanded unemployment compensation benefits
PA Department of Community and Economic Development working capital loans
PA and Ohio governmental programs
URA payment deferrals and emergency extended credit for its small business borrowers
Bridgeway Capital financing and resources to small businesses and nonprofits
Other stimulus packages to be enacted
As we have all learned over the last few weeks, the scale and impact of the Coronavirus pandemic are evolving at a fast pace. We will continue to bring the not-for-profit community Our Thoughts On ways to navigate this unprecedented challenge. In the meantime, we encourage you to visit the Schneider Downs website for the most recent updates related to the COVID-19 legislation and business issues.
You’ve heard our thoughts… We’d like to hear yours
The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].
Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.