Furlough

Furlough any non-essential employees and consider not paying PTO, which can be restored when employees are brought back. This is a difficult decision that companies should not take lightly but can be a critical step to minimize cash flow losses when not generating sufficient revenue to support the overall business.

Maintain aspects of the business that can operate profitably during this time, minimize cash expenditures, and transition employees and resources to support areas like e-commerce, delivery and distribution that may be experiencing increases in demand.

• The more successful companies are in keeping productive employees on the payroll, the more likely they can seize the opportunity for a successful rebound
• Reduce cash payment for goods and services as much as possible, relying on credit terms and transferring goods from closed locations to support sales in other areas of the business
• Ensure that customers are willing and able to pay for goods and services sold

Hibernation Plan & Budget

Consider putting together a hibernation plan and budget. This should include a list of team members and business functions that are critical to maintain the business through this period and best position it for a successful restart.  Among the steps to consider across different corporate functions are:

• Executive team to receive discounted or more incentive-oriented compensation
• Accounting / treasury team maintained to ensure continuity in accounting functions (closing monthly books, maintaining records through the hibernation period), tracking incoming and outgoing cash, calculating tax and other obligations incurred
• Legal team retained to address government relief options and lender negotiations as well as manage vendor, landlord and other creditor inquiries or disputes that may arise
• HR / Payroll to continue handling the administration and payment of payroll and benefits, as well as fielding unemployment and benefit questions from employees
• IT to maintain the critical systems while also ensuring that the business is able to execute an uninterrupted restart
• Communications team to stay in touch with internal and external stakeholders and provide a transparent and reliable flow of information

Post-Crisis Operating Budget

Develop a post-crisis operating budget that highlights the performance and cash flow needs of the business while it ramps up to more normalized levels, and includes costs that will need to be incurred as the business rebounds.  Among the items that should be considered are:

• Working capital / cash to the balance sheet
• Start-up losses as the business ramps up
• Unpaid commissions / wages
• Past-due AP and taxes (check if certain local, state and federal tax items can be deferred)
• Unpaid, current and go-forward rent obligations

Carl Marks Advisors is here to help you navigate this environment, and to answer questions you may have about these suggestions. If you, a colleague or someone you know has questions about what they should be doing in these uncertain times, please don’t hesitate to reach out to a member of our team listed below.