Cash Flow Analysis & Planning

Cash flow is one of the biggest areas that impact an organization’s ability to reopen, recover, and thrive in our “new normal.”

Managing cash flow is one of the critical strategies for any healthcare organization, large or small, navigating our current crisis. Time is a critical factor. The sooner you take action, the better. Responding quickly to cash flow challenges helps you to achieve cost control and to maximize liquidity, which will greatly impact your organization’s success rate. By prioritizing near-term financial needs, your organization will be able to achieve business continuity, which will, in turn, allow your leadership team to make the tough decisions facing your organization in the days and weeks ahead.

While no one solution fits all needs, we developed a series of short, easy-to-navigate considerations and checklists that can help produce a customized solution that fits your organization’s needs.

As always, we can help you navigate these cash flow considerations. If you have questions or would like to discuss your situation, please contact us. We’re here for you.

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Generally, you’ll need to consider the following issues as you craft your customized cash flow solution. Use the form to download a copy of our workbook to keep track of your checklists and progress.

Download the Cash Flow Workbook

We created a downloadable workbook to help guide you in creating a customized cash flow solution and tracking your progress. Fill out the form to download.

Re-Budgeting Checklist

Current and potential future shutdowns can dramatically change budgeted plans and can cause detriment to business operations and business processes. We believe it is important to plan ahead for disruption and actively re-budget to help navigate business cycles and crises. The following are considerations in re-budgeting and adjusting to disruptions in your plan:

1. Determine Your Current Liquidity

Assessing your current working capital. Working capital is defined as current assets (liquid assets such as cash, accounts receivable, etc.) minus current liabilities (accounts payable, payroll liabilities, etc.). Determining your current liquidity is an important foundation for understanding your ability to weather business disruptions.

2. Assess Your Liquidity Options

Understanding and investigating your potential liquidity options with bank partners will help you understand how to react to disruption and cash flow considerations. Having a good relationship with your business banker will help you to be able to respond quickly and optimally to disasters and crises. This may include traditional financing and government-specific programs. Click here to learn more about funding options for healthcare organizations.

3. Prioritize Your Expenses and Liabilities

Performing an assessment of payment priorities will help you to respond quickly to a crisis. Asking for extensions and flexibility from lenders is also an effective way to preserve capital.

4. Monitor Debt Covenants

Financial partners may have stipulating conditions to their funding, and you will need to monitor your covenants and speak with your financial partners.

4. Create a Plan to Reduce Non-Essential Staff

Having a plan to reduce non-essential staffing to levels that allow you to preserve capital may be prudent. Customer demand will drive the validity of such staffing adjustments.

5. Put a Plan in Place to Work Accounts Receivable

In global disruptive times, payors and customers are slower to pay. Working your accounts receivable balance and paying attention to accounts receivable turnover times in relation to historical performance is critical in maintaining reasonable cash flow.

6. Build Accounts Receivable Build-up/Drawdown Periods into Your Budgets

When business disruption occurs, building in accounts receivable buildup/drawdown adjustments in your budgeting will help understand the true trajectory of your future cash position.

7. Plan to Save During Recovery Periods

When times return to more normal operations, it will be important to build up liquidity as a preventive measure to future disruption. This means deleveraging and building up an emergency fund.

Need assistance? We can help you navigate these cash flow considerations. If you have questions or would like to discuss your situation, please contact us.

Ways to Improve Cash Flow

Improving cash flow is a continual business objective, but as small businesses emerge from the closures and lost revenue due to COVID-19, it is vital to closely monitor and ultimately improve cash flow. While going to the bank to renew a line of credit and take advantage of loan deferral is important, looking at ways to increase revenue and manage the timing of receivables is crucial. In particular, small healthcare businesses need to focus on the following:

1. Confirm all patient insurance eligibility.
If patients are no longer covered, offer to proceed with services if they can provide payment at service.

2. Consider offering a cash pay discount.

3. Discuss payment terms with all vendors.

4. Evaluate expenses – prioritize the expenses that generate revenue.

5. Set team goals based on daily, weekly, and monthly collections.

6. Consider a membership plan for your patients.

7. Maintain inventory of supplies so you have the right amount on hand.

Need assistance? We can help you navigate these cash flow considerations. If you have questions or would like to discuss your situation, please contact us.

Operational Considerations for Cash Flow Enhancement

As businesses reopen or return to a more normal operating schedule, now is the time to examine your operations to see if there are ways to eliminate inefficiencies or increase productivity. Some business requirements have changed as a result of COVID-19. How can business owners minimize the disruption of these changes and use the disruption to make proactive changes in their businesses? Our recommendations include the following:

1. Cross-train staff in order to maximize utilization and minimize interruptions if staff are out.

2. Determine how to manage staff time when the patient schedule is not full.

3. Manage overtime to keep all employees under 40 hours.

4. Analyze the flow of patients and re-evaluate for efficiency – from the car to the door to the front desk to the procedure room to payment to the car.

5. Maintain appropriate required PPE in order to avoid unplanned business interruptions.

Need assistance? We can help you navigate these cash flow considerations. If you have questions or would like to discuss your situation, please contact us.

Regulatory Considerations for Employers

Employers manage various issues associated with employee (and family member) illnesses, unplanned absences, and workforce productivity challenges every day. Managing contagious conditions in the workplace is not a new challenge for employers. While the manifestation of the coronavirus presents many of these familiar challenges, there are some new and unique concerns facing employers — most notably the uncertainty, media coverage, and lack of a vaccine. Employers need to understand the legal and regulatory considerations associated with responding to illness in the workplace now more than ever.

Often businesses think that they can’t afford to stay in compliance. You might think that new PPE is too expensive or that you don’t have the ability or resources to comply with the new COVID 19 guidelines, but ignoring regulations can cost your company a lot more in penalties and fines and even lawsuits.

Here are some regulatory updates for issues arising from COVID-19:

Occupational Health and Safety Act (OSHA)

Employers must provide a place of employment free from recognized hazards that are causing or likely to cause death or serious physical harm. It’s important for employers to be sure that they do not expose employees to risks associated with contracting the coronavirus. For example, if an employee exhibits symptoms of the coronavirus, the employer should send the employee home. Likewise, if an employee is diagnosed with coronavirus and had previously been in the office, the employer should have the office deep-cleaned and disinfected.

Family and Medical Leave Act (FMLA)

Employees who are diagnosed with the coronavirus or are medically quarantined for suspicion of having it may be eligible for FMLA since coronavirus may be a serious health condition. Those who are self-quarantined without having seen a doctor or receiving treatment may not satisfy the serious health condition requirement under FMLA.

Americans with Disabilities Act (ADA)

ADA considerations for employers now that the coronavirus has been declared a pandemic include:

  • Employees who are exposed to the coronavirus and are quarantined as a consequence may not necessarily be disabled as defined by ADA.
  • Employees who are actually diagnosed with coronavirus will likely qualify for the rights and protection of ADA.
  • EEOC has stated that in some circumstances a leave of absence may be a reasonable accommodation under ADA. Employers should consider prior practice for consistency and compliance.
  • Assessment of whether an employee poses a direct threat in the workplace must be based on objective factual information. Employers should rely on state or local health officials to determine the severity of the pandemic in their community.
  • Telecommuting may be a reasonable accommodation and employees can be asked to work remotely. Employers will have to contemplate what their telecommuting policy will look like regarding access to technology and cybersecurity.

Fair Labor Standards Act (FLSA)

Except under certain conditions, employers cannot reduce the salaries of exempt employees. If they do, they might subject themselves to rules for nonexempt employees and owe them overtime pay.  Exempt employees who are not infected and can work may find that they must fill in for absent, infected co-workers or those who have been laid off because of a decline in business.  Job descriptions may be significantly altered and may potentially compromise an employees’ exempt status. Employees who are able to remain working may be faced with increased overtime hours and the employer may grapple with possible overtime abuse. Employers should be sure that their time and attendance policies are up-to-date and distributed throughout the workforce.

Regulatory Checklist: 

1. Determine the regulations that affect your organization that may require investments.

2. Talk to your HR/legal counsel to ensure that your plans comply with the requirements.

3. Communicate with and educate your employees on COVID-19 issues related to the workplace and how you are addressing them.

Need assistance? We can help you navigate these cash flow considerations. If you have questions or would like to discuss your situation, please contact us.

Employees and Safety Impact on Cash Flow

The reopening from the COVID-19 shutdown is going to change the way employers do business. Businesses have to make employee safety a top priority because protecting employee health is central to protecting public health. All employees who are on the job during this pandemic – from frontline health care workers and emergency responders to those working in supermarkets, delivery, pharmacies, factories, transportation, sanitation, and all other workplaces – must be protected from disease transmission. This, in turn, will protect the employee, the business, and the public.

Business owners will incur extra expenses to make sure that employees are safe. It will be more important than ever to make sure that these extra costs are included in new budgets, potentially even passing some of the expenses onto clients. Now is not the time to cut corners on safety. It could cost your organization more in the long run in penalties, fines, or even possible closures.

Here are some ways to protect your employees:

  • Increase physical distancing between people to six feet.
  • Everyone should wear masks – if you are not able to maintain six feet of distance then employees should wear a mask.
  • Wash hands frequently.
  • Flexibility in where and when to work – Employers should explore whether they can establish policies and practices such as flexible worksites (e.g., telecommuting) and flexible work hours (e.g., staggered shifts) to increase the physical distancing among employees and between employees and others.
  • Cleaning and disinfecting workspaces and common areas.
  • Enforce sick policy – send sick employees home immediately.
  • Cross-train employees – this encourages employees to stay home when sick and allows employers to main their business.
  • Provide education and training materials on your new policies and safety practices.

Employees & Safety Checklist

1. Estimate the costs of PPE and extra expenses needed to keep your employees safe and make sure you know the effect on your bottom line.

2. Have appropriate PPE and usage instructions available.

3. Refer to industry-specific safety guidelines.

4. Add cleaning procedures, social distancing, and other procedures to daily tasks.

Need assistance? We can help you navigate these cash flow considerations. If you have questions or would like to discuss your situation, please contact us.

Supply Chain Considerations for Cash Flow

One of the most notable disruptions of the COVID-19 crisis has been the shortage of personal protective equipment (PPE) for medical personnel providing care to infected patients. Another disruption has been the closing of most of the non-essential healthcare system as part of the broader effort to close all non-essential businesses. Governments are beginning to allow non-essential medical and dental procedures, but both governments and patients are requiring still-hard-to-find PPE as a condition of reopening. And, of course, your organization must be open and remain open to generate cash flow.

It’s not likely that every medical facility will have enough supplies to open immediately and stay open, which means that some facilities will try to hoard critical supplies the same way that consumers hoarded toilet paper and hand sanitizer. Some may reopen only to have to close again due to lack of supplies, which can adversely affect the relationship between the facility and its patient base.

In the short term, limited supply will drive the spot price of critical supplies sharply upward, lasting until the market trusts that adequate supplies are in the pipeline. Much of the PPE and drug supply is manufactured overseas, which adds to their lead time and potential supply issues over the next 90 to 120 days. Other items such as disinfectant wipes, which are manufactured in the U.S. from raw materials sourced from overseas, are likely to be in short supply through the end of summer 2020.

A critical issue to keep in mind is that the reopening of businesses is happening unevenly, and with some areas opening sooner than others, both supply and demand will fluctuate until a new normal balance is reached. It is important to remain vigilant and flexible.

Steps You Can Take Now

One of the first changes to be made is to appoint a trusted employee to oversee critical supplies, from PPE and diagnostic and treatment supplies to cleaning supplies and drugs. This employee must know the amount of stock on hand (weekly physical inventories are recommended), daily usage, lead time to get more, and alternate sources of supply if the primary source is out of stock. This employee should also oversee all ordering and order tracking. Most important is that the employee share price and availability concerns with key managers and departments through reporting and/or weekly meetings. Then you should also consider expanding the number of your suppliers to increase your chances of finding the supplies you need.

Critical Supply Checklist

1. Appoint an employee to oversee critical supplies. This individual should track daily utilization and inventory levels. Using these findings, they should provide notification of any concerning stock levels, adjust purchasing volumes, and suggest conservation measures to preserve supplies.

2. Designate a secure location for storing PPE and other critical stock to prevent theft and excessive usage.

3. Consider expanding the number of sources you use to procure supplies.

4. Monitor the market for changes that may affect the availability of critical supplies.

5. Establish weekly calls with suppliers to check their current and projected inventory levels and upcoming delivery schedules to your facility.

Need assistance? We can help you navigate these cash flow considerations. If you have questions or would like to discuss your situation, please contact us.

Customer & Demand Impact on Cash Flow

The reopening from the COVID-19 shutdown is happening unevenly. Many businesses that open first may find that either few customers know the business is open or few customers feel comfortable going out and possibly exposing themselves to the virus. And many people have made the decision to wait until they see others successfully go out in public and remain healthy. This poses a significant problem for businesses operating with a full load of expenses but only a portion of regular revenue.

Start Your Cash Flow Projections Now

If you haven’t already, you should begin putting your cash flow projections together. Prepare several versions using different revenue levels so you can determine your organization’s break-even point and how sensitive you will be to different rates of recovery.

If you have furloughed employees, consider a recall in stages that could minimize the risk of low demand when reopening.

If your business has received a Paycheck Protection Program (PPP) loan, consider the requirements of the loan in your projections. For more guidance on PPP, click here.

Communicate with Current and Potential Customers

In this environment, it’s important to be proactive and reach out to your customers. Ideally, this effort would start several days before the actual reopening so that you can reopen to immediate customers and cash flow.

Start with your website. Add a post, page, or section announcing your reopening and describing the cleaning procedures, social distancing, and any other applicable procedures.

Once you’ve done this, you should look for ways to drive visitors to that announcement. One method is through using a pop-up or banner on the website so all visitors are notified and can click through for more details.

If you use social media or online listings for your business (Yelp, Google My Business, etc.), you should also post links to your reopening & new procedures information on these platforms so that customers looking to see whether you are open or not can find the updates easily. If using social media platforms like Facebook, Twitter, or LinkedIn, consider “pinning” the post with this information to the top of your feed so that users can find it quickly without searching through any posts you may share after this is posted.

If you have contact information for your customer base, consider sending an email or letter/postcard to your customers announcing your reopening and these procedures.

Communicate with Referrals or Community Partners

If your business is referral or partner dependent, call, email, or send letters to referral sources announcing your reopening and COVID-19 procedures.

Customer and Demand Checklist

1. Prepare multiple versions of cash flow projection to determine the company’s break-even point and how sensitive the company is to different rates of recovery.

2. Add a COVID-19 announcement to your website. (Include pop-up or banner on all pages to direct all visitors to this information.)

3. Post links to the information on your website on your social media and online listings. (Consider “pinning” posts to the top of social media feeds so that it’s easier for customers to find.)

4. Consider sending an email or direct mail announcements to current customers if you have their contact information.

5 Send announcements to your referrals and community partners through email or director mail, or simply give them a call to let them know.

Another consideration for healthcare organizations related to customer demand and impact on cash flow includes how to maintain and expand market share to better serve patient needs. Learn more.

Need assistance? We can help you navigate these cash flow considerations. If you have questions or would like to discuss your situation, please contact us.

M&A Opportunities for Healthcare

If your organization has been fortunate enough to emerge intact from the COVID-19 crisis and is financially strong, this could be the time to acquire independent practices or employ individual private practitioners who are in financial distress. Many practices may sell for much less than they would before the crisis, and with interest rates at near-record lows, opportunities for financing have never been better.

An acquisition can enhance an organization in a variety of ways:

  • Increased capacity
  • Additional service offerings
  • Expanded geographic area
  • Vertical integration of service offerings

Successfully acquiring a business is an art. The acquired business and its culture need to be a good fit and care must be taken to decrease the risk of unexpected problems. A well-designed plan can significantly reduce the risk associated with acquisitions. These steps usually include:

  • Due diligence investigations of the target’s finances
  • Negotiation of terms and financing
  • Legal assistance in drafting letters of intent and acquisition documents
  • Assessment of IT systems and cost of integration
  • Financial projections of the proposed combined entity demonstrating the value of the proposed transaction

Need assistance? We can help you navigate these cash flow considerations. If you have questions or would like to discuss your situation, please contact us.

Connect with our team.

To learn more about our services and areas of expertise, send us a message.

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