Israeli Financial Expert Advises Businesses on Crisis Survival Strategies

Businesses can survive economic downturns not by focusing on revenue, but by meticulously managing cash flow, according to Israeli financial consultant Liza Bakhrakh. She emphasizes that a common pitfall for profitable companies is a "cash gap," where immediate obligations are due before customer payments arrive. This issue is exacerbated in Israel by non-monthly payments like VAT, advance income tax, and National Insurance Institute (Bituah Leumi) contributions, as well as municipal property taxes (Arnona).

Bakhrakh, a Haifa-based accountant with over 30 years of experience, advises business owners to move beyond emotional financial decisions and focus on data. The first crucial step is a comprehensive understanding of the company's financial situation. This involves creating a detailed spreadsheet listing all expected income with dates and all mandatory expenses with their due dates. Reliability of income sources should also be assessed, as verbally agreed deals can fall through during crises.

A key distinction is made between profit and the balance in a bank account. The account balance may include funds earmarked for taxes and other obligations, not actual available capital. Bakhrakh recommends separating tax funds into a dedicated account to get a clearer picture of usable cash. She also stresses the importance of regularly reviewing recurring expenses, categorizing them by whether they generate revenue, reduce risk, or are non-essential, with the latter group being candidates for reduction.

When considering loans, Bakhrakh cautions that they are not a solution if the underlying financial issues persist. Businesses must understand the root cause of the deficit, project when positive cash flow can be restored, identify repayment sources, and assess affordable monthly payments. Alternatives like negotiating payment deferrals with suppliers or tax authorities, and exploring government-guaranteed loan programs for small businesses, should also be considered.

To improve cash flow, businesses should actively pursue overdue payments, explore options for faster payment from current deals, offer additional services to existing clients, and review pricing. Payment terms, such as requiring advances or breaking payments into stages, are as critical as the price itself during a crisis. Bakhrakh advocates for a minimum three-month financial planning horizon to anticipate shortfalls and allow time for corrective actions, emphasizing that proactive planning is far more cost-effective than reacting to a crisis when it hits.