Situation: Markets are currently down but everyone is hoping for a recovery. As business improves a company needs to manage cash flow to support growth. How do you manage cash flow in a recovery?

Advice from the CEOs:

• This is a common challenge following a down period. Companies have reduced personnel and used up cash reserves to survive. As demand resumes it may be necessary to add resources as you increase production. It’s important not to let accounts payable get ahead of receivables.
• Ask customers for deposits on orders – giving you up-front cash. Give priority to those who respond positively.
• Redesign the work-flow. Add independent contractors on a project basis. This requires good cost estimates and well-defined deliverables.
• Work with your bank and Line of Credit.  An LOC should cover 1-3 months of operation. Ask for a lot, and shop different banks for favorable lines and rates. An LOC is a short-term obligation whereas debt may be long term. Watch your debt covenants for restrictions on obligations to assure that you stay in compliance. LOCs are frequently Prime plus 1-2%.
• If you have a broker, see what rates they will offer on a business credit line to keep your brokerage business.
• The best alternative is to plan ahead and develop a strong relationship with your banker. This centers on a reliable credit history, so that when need arises, the banker will help you based on your past performance and the confidence that they have developed in you and your operation.

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