Strategic Cash Flow Planning & Execution with Your PPP Loan (2 of 3)

May 5, 2020

This is the second in GrowthLab’s series. We previously explored, “How to Strategically Use Your PPP Loan,” and subsequently published, “Tracking & Documenting Your PPP Loan Forgiveness.”

Cash Flow Planning & Your PPP Loan

Let’s quickly recap. First and foremost, you need to ensure that the money is spent strategically to drive business value (not just employment). If you don’t have a plan for that, read more in our “How to Strategically Use Your PPP Loan.” Secondly — and our focus in this article — you need to plan cash; optimize where and when you spend the money to ensure that you can get an optimal forgiveness amount balanced with optimal value for your business. And, lastly, in our next piece, we will talk about the need to keep track of the PPP money to document your forgiveness.

Cash Flow Planning is not complicated, but it can be extremely tedious, daunting, and — let’s face it — emotional for small business owners. What we want to do today is give you the tools to make the process manageable and to give you instructions to execute.

Let’s first look at the tools to use, then we’ll talk about how to use them.

  • 13-week cash flow. This is a great tool to manage cash in times like this when success hinges on short-term liquidity. This is a super-tactical tool — who are you paying and when; who is paying you and when. In the “forest and trees” phrase, this is the trees.
  • 6-month (or 12-month) cash flow. This is an excellent tool to manage mid-range liquidity needs. This is a more strategic tool to help you see beyond the current situation. In the “forest and trees” phrase, this is when you start seeing the forest.
  • PPP Loan tracker. This is an amazing tool built specifically for the PPP Loan and forgiveness. Use it to track expenses and calculate your estimated forgiveness.

We will start with the last one, the PPP Loan Tracker. Use this, initially, as a scenario-planning tool to estimate (1) your forgiveness and (2) the amount that will remain as debt on your books and need to be repaid. This will give you a few things. First, it will give you your overall, initial “PPP Roadmap” for the 8 weeks. Second, it gives you visibility into the level of forgiveness that you could have, based on that initial roadmap. Third, it provides your estimated monthly debt payment on the tail end of the PPP.

Next, let’s build a 13-week cash flow for your business. We have a full guide on how to build your 13-week cash flow on our site, so I won’t go into the details. What this will do for you is to help you refine and edit your PPP Roadmap. The number one rule during these next few months is conserving cash, while not shattering your foundation. It is crucial to think about what expenses you can pull back on that aren’t delivering value to your business.

Last, build yourself a 6- or 12-month cash flow plan. This is less tactical than the 13-week cash flow. This document will look beyond your current situation and pull in your strategic thinking and strategic roadmap for surviving and thriving after COVID-19.

The businesses that make it out of this alive will be better equipped for the long run. The name of the game is not to make it for 2 months. The name of the game is to be standing in 6 months.

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