Assess the real state of the situation

In times of crisis, it is even more important to take the time to assess the real state of your financial situation. “You have to give yourself the right to change your plan along the way,” says Martine Robillard. “It is wise to do tighter budget monitoring and comparisons between the state of your operations in real time and the forecasts you had set.” Having a clear vision of your finances, your results (positive or negative), changes within your business ecosystem, your returns on investment, is essential when you are in the fog. The exercise of sitting down to observe and analyze is a crucial step to adjust as you go along and to quickly review your strategic planning and business model.

Review the operating cycle

“A crisis situation highlights the weak links, the work methods that need to be developed, the financial procedures that need to be reviewed more closely,” observes the advisor-trainer at the École des entrepreneurs du Québec (EEQ). While the sales book is down, the risk of finding yourself lacking the cash needed to operate the business is very real. “When the volume of business drops, the cash flow dries up. It is vital to know and modify your procedures well. You have to review the entire operating cycle, for example: reduce the inventory level so as not to end up with dormant paid stock that has not yet been collected, review the recovery period for accounts receivable, which is generally 60 days, in line with the 30-day payment period for suppliers.” Martine Robillard notes that the current crisis, although difficult for SMEs to get through, has brought out a lot of empathy and kindness. Many suppliers have been able to agree on new deadlines with distributors, and vice versa, in order to calm things down a little.

Control fixed costs

Cash inflows and outflows are always in flux, but fixed costs remain. “In difficult times, you should try to limit them and, as much as possible, convert them into variable costs.” Controlling fixed costs is not an easy change, or one that can be done in the blink of an eye, warns Ms. Robillard. You have to be able to make agreements to try to convert your fixed costs, such as your rent, insurance, an annual service, based on your sales volume that has changed, even temporarily, she suggests. Here again, clarity and communication are essential.

Make multiple scenarios

Flexibility is the trump card, especially when recovery is slow in coming. Establishing several short-term, even very short-term, but also medium-term scenarios, by integrating the variables linked to uncertainty, allows you to adjust and pivot your business model. "There have been many companies that have pivoted, and I would even say turned around!", illustrates the advisor. Those that have been able to clearly establish their financial forecasts around their pivot have, in general, made their turn more profitable." It is about having agile management, which does not aim to strictly follow plan A, but adapts it along the way, while maintaining its purpose. Far from paralyzing action, the analysis of several scenarios allows you to assess the risks of all possible options as well as the market opportunities to be seized. Knowing how to thoughtfully integrate uncertainty into decision-making gives entrepreneurs the flexibility they need to continue moving forward.

Use the Previsio tool to see things clearly

The Previsio financial planning tool, developed by the EEQ, provides an overview of your financial situation in real time in order to make informed decisions in times of uncertainty. The platform produces clear professional reports, allowing more autonomy and control over the management of your business. By closely monitoring your forecast financial statements, the entrepreneur will be able to assess which activities are more profitable, and which are riskier given the circumstances. The reports are accompanied by useful advice and explanations. The software makes it easy to identify variable costs from fixed costs. It is also possible to record scenarios over the short term, to the nearest month, or up to 36 months, in a completely confidential and free manner.

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The École des entrepreneurs du Québec offers short online training courses to introduce the tool to those who would like to use it immediately.