If you have cash and credit facilities, here’s what you’ll need to do (if you don’t have adequate credit facilities, you’ll still need to do the same thing unless you’ve decided to liquidate).  This is a process that will take a sustained effort and it’s scalable.

Set up a Cash Management Office (CMO) represented by Executive Management, Finance/Accounting, Sales, Master Scheduling, Operations, Procurement, HR.  This can be done for an independent small, medium or large business or a division of conglomerate and the conglomerate itself.  The independent businesses would have their own credit facilities whereas the conglomerate would have a tiered structure of these offices and could be the financière for divisions.  The process the CMO will go through will be executed quicker for the small independent business and will take longer in a tiered corporate structure where multiple CMOs feed a Principal CMO.

The CMO will intimately understand the cash position of the business on a daily/weekly basis through the development of a sources and uses or cash model.  The model forecasts cash needs for internal decision making and credit needs for at least a rolling 13-week period.  The CMO will analyze several alternative cash scenarios making decisions of which customers get how much of which products and when and which suppliers need cash in advance or will work with payment terms.  The cash model may have to be created outside of your ERP system for expediency and it will be modified for accuracy as you go forward.  The model will be shared with your credit supplier on a weekly basis or when a significant change occurs.

 All your decisions will be based on cash and expected cash through trade and credit.

Starting up, or ramping up, after the COVID-19 downturn may be impossible for some firms, and difficult for many others. Cash and credit could be scarce, customers and suppliers may be gone, and customer-to-supplier value streams will be volatile for quite some time.  Navigating through this requires cash, lines of credit, and continuous cash scenario analyses almost every time a series of orders is placed.

Daily questions from the CMO:

How much cash do we have?

  • What’s the status of wire transfers and check clearing?
  • Where are we against our credit facilities?

Which products can be sold to which customers?

  • You’ll be rationing. If you have an aftermarket, customers or distributors may be over ordering and you’ll be making unilateral allotment decisions.
  • Which orders can be acknowledged at this time for what amount and in what timeframe?
  • When is payment planned to be received? Will you demand cash in advance and if you do can you make sure the cash will be used for that order?

What Finished Goods, WIP and raw Inventory is currently on hand to satisfy firm orders?  Can your inventory and control processes allocate that inventory?  Can any finished goods be substituted?  Can any WIP be converted?

What needs to be procured?  What are the quantities and lead times?

  • Will you need cash in advance to secure your items?
  • Have the terms changed?

What orders can be shipped in advance of the due date?  Do you have to significantly reschedule operations?

Are there any finished goods, raw or WIP inventory that can be liquidated as is for cash to fund current firm orders?  This can be an emotionally painful decision, but necessary.

What hourly labor is needed to convert orders?

  • Can you call in labor by skills or union contract?
  • What will be the payroll needed for this week and beyond?

What salaried labor is needed?

  • What will be the payroll needed for this week/pay period and beyond?

What indirect materials, supplies, perishable tooling and maintenance items are needed to support this level of operations? 

You will probably be forced to operate in exact customer order quantities or even single piece lot sizes and will not be able to tolerate any scrap.  Changeover lot sizing will no longer apply if it creates any WIP in excess of exact orders.  Management operating systems and key metrics may have to redefined and Lean Six Sigma skills will be tested.

What are associated freight costs?

How much has to be paid for utilities, interest on debt, rent. Taxes?

Determine how much cash you’ll have left after the period and if you’ll need to borrow.

Does the business have breathing room, available credit plus cash, to survive?

An Example: 

A closing word from SBTI’s CEO:

During the fast changing and unprecedented times, we at SBTI would like all of our clients, friends, and partners to know, SBTI has taken steps to continue all business operations.  We are currently facilitating training, workshops, and consulting via Microsoft Teams and other online means.  Our office phones are up and running and all employees are working within a virtual office  

SBTI has operated through the 9/11 attacks, and the economic crash of 2008, it is fair to say we have never experienced anything like this, but we are here for you, and committed to be here for years to come! 

In closing we sincerely hope all of you are well and safe, and if we can help you please do not hesitate to ask.

Thank you, 

Bill Zinkgraf 

If you would like to request a listening session for your business, you can contact me, Bob Jeske, by email at bjeske@sbtimail.com.