Yes, you should have sufficient reserves to handle most expected declines in business volume. And … yes … you should have arranged the largest possible line-of-credit (LOC) with your financial institution in advanced. You can use a LOC as needed to handle growth in good times and to sustain the business in bad times. But you cannot go back to put those reserves and plans in place now. It is too late after you are plunged into a deep business hole with the corresponding huge drop in revenue. Once in the wilderness with no clear vision ahead, where there is little if any cash in-flow, the first step is to stop all cash outflows.
No payments should be made until you can prioritize exactly what should be paid and when. Concurrent with the stopping of all payments, you should be communicating with the key players in your operation. Here are some ideas and an approach that, once adopted, can make a measurable difference: Take care of your employees first. Set aside the cash needed to pay the currently due payroll and associated taxes. Then project the level of staffing needed in the very short-term. Develop your initial survive and thrive plans. Once those rough amounts are known, reserve the existing cash for specific purposes for at least thirty days.
Furlough employees who cannot be directly productive with customer services and production. If at all possible, maintain all employee benefits. Advise them that you are making new plans that you will share with them as soon as they are completed and proven viable.