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Photo: Unsplash

Setting up your ‘Cash War Room’ to plan

your crisis survival strategy
Colin Wright

Colin Wright

Founder at The Virtual CFO Group Australia

Published May 22, 2020

+ Follow

Cash is the life-blood of the business. Colin Wright explains how the business can manage
liquidity through the ‘Cash War Room’ concept, and who should be involved in ‘Cash War
Room’ activities.

The Government has set up a War Cabinet to plan Australia’s response to the current pandemic
crisis. Similarly, your business needs to set up a Cash War Room to plan your response to the
unfolding crisis so that you can survive this period. The immediate risk to an ongoing business is
one of liquidity.

Therefore, there are two key issues that all businesses need to focus on.

 Ensure you have the CASH to deal with all the circumstances you might face, and
 Ensure you are AGILE enough to respond to changing circumstances if or when the
environment changes

So, what would a war room look like and what would it do?
Your Cash War Room structure
Senior management must be involved. You will be making decisions about sales and marketing
activities, operational activities, and resourcing the business during changing circumstances.

A critical member will be the CFO or Head of Finance. This person will be responsible for
ensuring the strategies are aimed at ensuring that cash reserves will be sufficient for the survival
of the business. This needs to be modelled in the face of major uncertainty. The uncertainty
means that the CFO needs to model a range of scenarios involving many variables, both internal
and external. The questions are: What will be the impact on the business’ critical cash reserves
under different scenarios? And, how should the organisation respond?

Your Cash War Room activities

The following concerns need to be addressed:

 What will happen to sales, and what are the best- and worst-case scenarios?
 Will your customers continue to meet their payment terms, or will they start hanging on
to cash and delay payments?
 How will we respond to those circumstances?
 Are your variable costs truly variable?
 How leveraged is your business to sales volumes? This refers to the level of fixed costs in
the business. What can be done to reduce the fixed costs in the business while protecting
the operational capability of the business so that it can ramp up again once markets start
to reinvigorate
 How secure is your supply chain? Are our suppliers able to continue to supply? How
secure is their business? Do we have alternative sources of supply?
 Are you able to stretch payment terms?
 While the business world is turned upside down, what are the opportunities to
significantly change the way you operate your business in the future?
 New ways of doing business and driving productivity improvement in this environment
present an opportunity to reposition your business and its cost base
 What alternative sources of funds do we have access to? These will include:
 Government assistance packages and grants
 Bank loans, overdrafts or lines of credit
 Other sources of debt funding
 Capital injections
 Sale of assets

These and many other factors must be considered and included in scenario planning models. This
type of modelling needs to be reviewed and revised on an ongoing basis as the circumstances
will continue to evolve and change.

The critical focus on cash and agility are the keys to your survival.
CASH
We all know that cash is the lifeblood of all businesses. In times of heightened uncertainty, you
need to have a higher buffer than at other times. This is because there is increased risk. This
means that it is not just a matter of ensuring that you always have positive cash balances. It
requires the business to have a healthy buffer or options for alternative funding if it becomes
necessary. It also needs clear decision triggers to change direction, and scale up and down.

AGILITY
Your business needs to be mindful of how quickly it can change course. You may have made
decisions that you have started to implement when there is a major change in circumstances. The
speed with which you can respond to these changes will have a big impact on your performance.

The activities that you undertake in your Cash War Room will also be the activities that enable
you to successfully rebuild the business when things start to pick up. After the crisis has started
to ease, will your market pick up only gradually or will it pick up quickly? Will the very nature
of the industry you operate in change in some way that means you need to reposition or refocus
your business model?

So many factors have to be understood along with the magnitude of their impact on your
business. The effectiveness of your Cash War Room will determine not only your survival but
how strong your business is in the post-crisis world.

The Virtual CFO Group has a team of experienced virtual CFOs and financial modellers that can
play a key role in your Cash War Room. Contact us today to arrange an obligation-free consult to
discuss your Cash War Room strategy.

15 3 Comments
Ramdoss HL

I transform SMEs by empowering them to use Risk-free Outsourcing to slash costs, save time
and focus on their business.

2y

Colin, thanks for sharing this.

Like

Reply
Tim Boyle - Property Finance4Nurses

Property Finance for Nurses: “Every nurse can and should own their own home”. CEO and
Mortgage Broker at Finance4Nurses, the largest mortgage broker for nurses in Australia.

3y

Great article Colin. Thanks

Like

Reply
Jodi Woelkerling

►Resilient People ►Resilient Workplaces ►Healing the Underlying Trauma that Threatens
Resilience ►Resilient Culture Consultancy, Coaching & Training ► Resiliency Leadership

3y

Great article Colin Wright with insightful tips on managing cash flow that will apply to many
businesses at this time.

Like

Reply

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