Solar

Lessons Learned: Cash Flow Forecast in a Time of Crisis – The COVID-19 Example


Lessons Learned is an educational series of webinars on financial management for your solar business presented by Leslie Shiner of The ShinerGroup and Annie Kendrick of Kendrick Business Services, LLC.

This is a special addition of Lessons Learned. We will not be presenting a fictional story; instead we will do our best to provide you with the knowledge and tools to navigate your business during times of crisis including the existing COVID-19 pandemic. We will also provide ways to prepare you for risks to your business in the future. Read below for an overview and you can find the pre-recorded webinar online.

CONSIDERATIONS NEEDED TO PREPARE AN ADJUSTED CASH FLOW FORECAST

1. CASH RESERVES: Identify the cash amount you need to reserve for maintaining critical infrastructure and payments required by law. What is the minimum cash you need to function for 4-5 months?
a) Key employees to be paid in order to maintain minimal operations
b)Payroll taxes outstanding (unless special government delay exemptions)
c) Remote collaboration and communication expenses
d) Sick leave and FMLA policies (determine if waiver is available for under 50 employees and check current employee handbook—seek legal guidance)
e) Purchase of materials for jobs that are allowed to continue
f) Continuation of health insurance for employees
g) Any additional unexpected critical needs—purchase of Personal Protective Equipment (PPE), etc.

2. RECEIVABLES: Determine when and if outstanding receivables will be collected within current terms
a) Contact each customer with an outstanding balance to determine expected date of receipt of cash and update billing contacts if they have changed.
b) Maintain lien rights by filing if needed.
c) If contract terms allow, send invoices to customers immediately instead of waiting upcoming current billing cycle

3. PAYABLES: Research expenses that you are able delay paying without penalty or negative consequences. (Attempt to get deferral agreements in writing.)
a) Utilities may allow you to defer payments
b) Supply Vendors may be flexible on terms
c) Determine if vendors will accept credit cards to allow more time to pay

4. PAYROLL EXPENSES: Identify areas where payroll expenses can be reduced
a) Establish which employees may be furloughed or laid off and the associated cost savings
b) Decide whether or not you will continue to pay health insurance for furloughed employees

5. OVERHEAD EXPENSES: Carefully analyze all overhead expenses
a) Review any commitments such as marketing, advertising, maintenance, memberships to see if they can be cancelled (temporarily or permanently)
b) Review any lease obligations (vehicles, copiers, etc.)
c) Look at all pending purchases to see if they can be cancelled or postponed (if the work has been put on hold).
d) Research the availability of loan payment deferrals

6. INVENTORY AND SUPPLY MANAGEMENT: Verify where you stand on inventory
a) Determine if you have inventory that was recently purchased and can be returned for projects that have been permanently cancelled in order to receive a credit
b)Confirm that you have the required equipment and material for projects that are still ongoing
c) Analyze the material and equipment needed for projects that will be the first to start when the pandemic hold is over. Estimate the delivery time to help schedule future work
d) Continually research to see if your current vendors will be able to maintain supply chains
e) Reach out to other suppliers as a contingency if your current supplier is not in business (temporarily or permanently)

7. EMPLOYEE RELATIONS: One of your most valuable assets
a) Continue regular communications with employees
b) Seek input from employees and identify volunteers for temporarily furlough
c) Provide assistance if possible to help employees as needed by continuing to pay health insurance and provide sick pay
d) Determine which employees are unavailable due to child care and school closures

8. CUSTOMER RELATIONS: Communication is key
a) Determine your backlog by contacting customers to identify if they need to cancel projects due to lay-offs, illness and other issues related to the pandemic
b) Let them know your current status with the ability to continue or not continue operations and as well as estimated schedule revisions

9. ADDITIONAL CASH SOURCES: Existing connections and new opportunities
a) Lines of credit—communicate with your bank to understand current terms and if an emergency increase is available. Check with your bank to see if they are offering any payment deferral options
b) SBA disaster and other loans with forgiveness
c) Owner loans—be sure to create a paper trail and sign an agreement
d) Check your current insurance policy to determine if you have business interruption insurance and will they honor for the COVID-19 pandemic
e) Identify available credit cards and request limit increase
f) Request partial or full retainage release. It doesn’t hurt to ask!

Economists have stated that we are in a recession. It is time to prepare and know where your business stands to navigate these turbulent times. To learn about how to create a Cash Flow Forecast in a Time of Crisis, view the pre-recorded webinar online.

Other Resources available:

SBA Disaster Loan Assistance
https://disasterloan.sba.gov/ela/Information/ApplyOnline

SBA Small Business Guidance & Loan Resources
https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

Families First Response Act: Employee Paid Leave Rights
https://www.dol.gov/agencies/whd/pandemic/ffcra-employee-paid-leave

Mandatory Employee Rights Poster
https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf
https://www.dol.gov/agencies/whd/pandemic/ffcra-poster-questions

CARES Act (Coronavirus Aid Relief Economic Security)
Including Paycheck Protection Program (7a Loans)
https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

You can find out more about the financial management program for Solar trade allies and other business development opportunities for your company online.