COVID-19: How Can You Optimize Your Cash Flow?

Check out our tips for managing your cash flow as effectively as possible during this public health emergency. Here are 8 practical questions and their answers to help you navigate this challenging time.

How can we plan and manageduring this global health and economic crisis? How can small businesses, in particular, secure their cash flow when late payments are hitting them hard and are at the heart of their difficulties? When the entire economic fabric is affected, what measures can be put in place to continue planning? An overview of the aid and programs available.

In France, the state of emergency has been set, for the time being, from March 24 to May 24, 2020. Read the official text on Légifrance

Government Assistance

3. In practical terms, how can you manage your cash flow needs with your bank?

What are the practical steps to take to receive the financial assistance guaranteed by the government?

1. Apply for the government-guaranteed loan right away. You should contact your banker and request the equivalent of three months’ revenue. This loan has a 0% interest rate for the first 12 months, with reduced fees. The interest rate thereafter, over a 6-year period, would be 0.25% for small and medium-sized enterprises (SMEs) and 0.50% for mid-sized companies. If you’d like a longer repayment term, you’ll need to negotiate it, and the bank must grant this loan without charging any margin.
2. You can also apply to BPI France in addition to—and in coordination with—your bank: https://www.bpifrance.fr/A-la-une/Actualites/Coronavirus-Bpifrance-active-des-mesures-exceptionnelles-de-soutien-aux-entreprises-49113
3. You should also ask your banker to defer the payment due dates on your outstanding bank loans . A three-month deferral, for example, can make a significant difference to your cash flow. Your banker should show solidarity and responsibility, given that this is a case of force majeure. If you encounter difficulties, contact the credit mediator: https://mediateur-credit.banque-france.fr/

4. How should you handle your employees?

5. How can you defer your company's social security and tax payments?

• Payment Deadlines for Taxes and Social Security Contributions: You have the option to defer all or part of your tax and social security payments for up to three months: https://www.economie.gouv.fr/mesures-exceptionnelles-urssaf-et-services-impots-entreprises

• Deferral of rent, water, gas, and electricity bills: If they are experiencing financial difficulties, small businesses can ask their suppliers or landlords directly for a payment deferral.

• If you encounter difficulties during these negotiations, you can also contact the business mediator:https://www.economie.gouv.fr/mediateur-des-entreprises

Measures based on common sense, responsibility, and civic-mindedness

6. How should you handle this with your credit insurer?

Some companies have chosen to hedge against customer risk through a credit insurance policy. However, given the economic climate or deteriorating business performance, insurers may be forced to reduce—sometimes drastically—their coverage for a particular company or even an entire industry. That is why you must closely monitor your customers’ credit ratings. You must also be vigilant regarding how insurers rate your own company so that you are not subject to decisions made by your own insured suppliers regarding your payment terms.

• If your clients have credit insurance, you may want to encourage them to negotiate with their insurers to maintain their credit rating.
• If your company is rated, negotiate with the insurer that issued the rating.
• The CAP, CAP+, and CAP France Export programs are being reinstated. Check with your credit insurers to take advantage of them—these are supplemental coverage programs backed by the government.
• If you encounter any difficulties, please contact the mediator: https://mediateur-credit.banque-france.fr/

7. How can you suspend your contractual obligations to customers?

8. What is the best way to prepare for the end of the crisis?

Continue to pay all your suppliers on time so that you maintain their willingness to accept your orders, ensure on-time deliveries, and, in short, preserve your good standing with them. Obtaining the government-guaranteed loan will provide you with sufficient funds to pay your supplier debts and to get your business back on track after the crisis. Those who fail to meet these deadlines risk being reported to the crisis committee through trade associations or mediation.

Do not relax your best practices in managing customer relationships. Follow up on overdue accounts and collect them with patience, consideration, but firmness. Large contractors who fail to honor their commitments may face fines from the DGCCRF for failing to comply with the maximum payment deadline. A crisis committee has been formed to document all reports of abusive practices regarding payment terms. If you are a victim of such practices, contact https://www.economie.gouv.fr/mediateur-des-entreprises or your professional organization to report this behavior.