For many small businesses, the economic calamity caused by COVID-19 has thrown their budgeting and business strategy for 2020 out the window. Although both federal and state governments are providing financial assistance to small businesses to see them through these difficult times, survival will likely come to those who are able to manage their cash flow well. In this post, we’d like to share some tips you can apply to manage your cash flow in a crisis.
1. Keep your financial statements updated
To stay on top of your business’ financial well-being, you’ll need to have the latest information at hand always. With that, you’ll be able to make critical decisions quickly. Can you afford to extend a credit line, is it feasible to launch a promotion campaign or should you consider switching suppliers? In a crisis, well-informed decisions can make or break the business.
2. Trim the costs of business
Slashing business costs is a natural thing to do to stay cashflow positive. However, this is an exercise that needs to be done judiciously. Take the time to analyse what the business needs to be able to weather the storm first. With that information in hand, identify where the cuts can be made without compromising the business’ ability to deliver on its promises. You will inevitably find ‘corporate fats’, for example, entertainment allowances, which should be slashed first. As a rule, try to avoid laying off staff.
3. Sit down with vendors and suppliers
Your vendors and suppliers are likely to be in a similar situation too. Like you, their priority is to keep the cash flowing, obviously more coming in than going out. Having said that, if they value the relationship with your business, they will consider terms of payment that benefit both parties. Have the discussion now.
4. Secure payments promptly
Cash is king, especially in times of crisis. It’s the lubricant that keeps the engine running. From favourable terms of payments, different modes of payment to incentivising early payments, activate them to ensure the business remains cashflow positive.
Speak to us to strengthen your business’ financial well-being.
