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Cash flow management is a critical part of business continuity planning for Small and Medium Enterprises (SMEs) and cash is the lifeblood of any business, especially in a crisis. With operations of most industries shutting down and operations scaled back in response to the pandemic, many SMEs are looking to implement cash management strategies to survive.

Effective cash management includes frequently analyzing a company’s working capital requirements and trying to optimize cash flows and funding sources (including new government relief measures) while looking for opportunities to defer payments. Effective cash management also includes creating timely cash flow projections while looking for ways to reduce variable costs, considering alternative or non-traditional revenue streams and getting clarity on available credit facilities.

Manage cash flow


A survey of 10,000 small businesses conducted in early April by the Canadian Federation of Independent Businesses found that cash flow was the biggest worry for 76 per cent of small businesses. In Ontario, only 30 per cent of small businesses reported having enough cash flow to cover their April bills. As the months continue, small business’ cash reserves will erode further, threatening their ability to operate.

Businesses that have shut down or with reduced capacity may need their cash flow forecasts updated weekly due to the uncertainty involved in the current climate. Noah Jensen, CPA, CA, from Racolta Jensen LLP in Cambridge, says, “Those businesses need to know when government relief will hit their bank account if they’re eligible, and in the meantime if they have a revenue gap they’ll need to start digging into lines of credit.” Jensen has found that, so far, banks are being responsive. "Some banks are permitting a ‘bulge’ for customers in good standing, that’s a 10 per cent increase in their line of credit and are open to negotiating interest-only payments for certain time periods." Businesses can also take advantage of new government relief measures such as the Canada Emergency Business Account that provides interest-free loans of up to $40,000 for qualifying small businesses.

In order to conserve cash, Jensen advises SMEs that are expecting their net income for 2020 to be lower than 2019, to hold off paying tax instalments until July or August and to take advantage of new government relief measures including federal and provincial tax deferrals. “At that point they can reforecast their taxable income for 2020 and adjust their instalments for the rest of the year accordingly. Any interest on under-remitted instalments will be due when the balance is calculated.”

Negotiating with landlords


Rent is one of the biggest costs for SMEs and many are looking to renegotiate rent terms with their landlords in the interest of improving their cash flow. CPAs are advising SMEs to approach their landlords to renegotiate and offer, for example, to pay only base rents for a period of time, so landlords’ overhead costs are covered and amortizing the remainder of rent payments over the rest of the lease. Legal advice should be sought before negotiating payment terms. Businesses can also benefit from new government measures that will lower rent by 75 per cent for small businesses that have been affected by Coronavirus.

But these negotiations go both ways and landlords may be struggling with liquidity as much as their tenants. Even with malls closed to customers, some landlords are not budging on collecting their retailers rent. Leaving SMEs to look elsewhere for cash management strategies.


Ken Bell, CPA, CA, from Bell CPA & Associates Professional Corporation in Brampton says, “People are finding themselves not just financially affected, but emotionally too. We’re encouraging our clients to collect as much cash as possible in sectors less impacted by the pandemic, but also extending patience and easier terms to customers who don’t have the ability to pay.” Accepting more amenable terms and partial payments can help suppliers and customers to bounce back quickly when the economy recovers from coronavirus.

Payroll strategies are another approach for managing cash flow. As discussed in the SME Financial Relief Guide, the government is providing a 75 per cent wage subsidy for eligible employers. The Ontario government is also providing temporary relief to the Employer Health Tax exemption and deferral of Workplace Safety and Insurance Board reporting and payments. Bell says that some employers with healthy cash flows are loaning money to staff so they don’t default on mortgages. Others are helping employees communicate with banks to renegotiate loans and lines of credit. “Many banks have been supportive and offering respite on loan payments for a few months with little administrative burden.”

The Canadian Payroll Association has useful guidance for employers managing Payroll during COVID-19. For more information about the Canadian Payroll Association, visit


In addition to cash flow management strategies that are important for immediate survival, companies should also consider re-assessing their overall business strategy to manage the impact of the coronavirus on their core business. Specifically, they must challenge their existing operating model and look for innovative ways of re-profiling their business while considering today’s continuously evolving economic trends and competitive pressures. Business as usual is no longer an option in today’s rapidly changing environment. The critical areas of focus for organizations will be revenue management, operating processes, strategic partnerships and digital transformation. On the digital transformation journey, businesses should have a well-defined strategy and clear roadmap. This will ensure that digitalization helps in delivering improved value to customers and in empowering employees to be more effective and productive. The focus on these areas will also require consideration of employee safety and continuous communication. Companies must strive to keep their employees abreast of planned changes while preparing for recovery as part of the efforts to develop and reshape their business.  



The Ontario Chamber of Commerce has a useful Pandemic Preparedness Toolkit for businesses that comprises of helpful questions to develop a business continuity plan which are included in Pages 9-13.

For some businesses already on the financial edge before the pandemic, recent conditions have pushed them over. If, after exploring cash flow and business continuity strategies, the SME cannot survive, they will need to speak to a CPA to assess the implications of declaring bankruptcy both for their company and them personally.

We thank the CPAs who shared their experiences with us and encourage our members to contact Professional Advisory Services at 416 204.3106 or 1 800 387.0735 x4456 or by email at [email protected] for further guidance.


Visit our regularly updated library of resources curated to help CPAs during the Coronavirus pandemic.