Cash Flow Management

Last updated 13rd May 2020

Cash flow management is an integral element of a successful business, and especially so in the current economic climate. It is essential that businesses develop a plan to preserve and manage cash flow as part of Covid-19 risk assessment and action planning in the near term.

Cash Preservation

Businesses must ensure they are preserving cash where they can. This can be done by managing supply chain risk, financing options, negotiating rental reductions, reducing variable costs and taking advantage of Government support.

Cash Management, Internal Review and Controls

Businesses should conduct a review of the existing structure in order to ensure minimal wastage and maximum efficiency. Focus on the following:

  • Inventory Management
    • Inventory safety stock parameters will need to be updated; you may consider securing additional stock as buffer against prolonged supply chain disruptions.
    • Consider reducing finished goods inventories, especially in perishable products.
    • Businesses must balance demand for buffer inventory vs. cash flow.
  • Manage Receivables
    • Customers may delay payments or negotiate payment plans.
    • Improve your collection process – focus on customer-specific payment performance and identify changing payment practices to plan for disruptions.
    • Practice timely and accurate invoicing. Reduce delays at all costs.
  • Internal Audit
    • Pay the right amount for purchases and collect the right amount on sales.
    • Make sure you are taking full advantage of discounts.
    • Put in place long term policies and process improvements to reduce wastage.
  • Convert Fixed to Variable Costs
    • Reduce pressure on the business by converting fixed costs to variable costs such as selling assets and leasing them back.
  • Cash Flow Forecasting
    • Create an up to date cash flow forecast to project cash inflows and cash outflows
    • Forecasts help identify and plan for peaks and troughs in finances
    • Update cash flow forecasts on a weekly or monthly basis. Circumstances are regularly changing, and businesses must keep up to date.

Technology and Cash Flow Forecasting

Cash flow forecasting tools such as Float can be used to easily produce a real time view of your numbers with the click of a button. Float can help businesses with a variety of functions:

  • Forecasts – Auto-forecasting option that predicts the future based on historical data or the manual option to be used now to factor in uncertain Covid-19 economic conditions.
  • Reconciliation – Automatic reconciliation with financial tools such as Xero or Quickbooks. It is recommended to update your bank reconciliation weekly, if not every couple of days.
  • Managing invoices and bills – This feature is particularly helpful at the moment, making it easy to keep track of accounts payable and receivable.
  • Creating budgets – Simple modification or creation of budgets. During the current changing economic landscape, users can quickly create and edit budgets.
  • Planning for different scenarios – Create different plans to factor in change in inputs such as government funding, delays in collections or impact due to government regulations.


Cash flow management needs to be an integral element of a business’s overall risk assessment strategy, especially in the current economic climate. We urge you to evaluate cash flow requirements, plan for various cash flow scenarios and plan accordingly.

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