Managing Business Cashflow During the COVID Crisis
June 1, 2020
The coronavirus pandemic has propelled us all into a new normal, changing “business as usual” to “doing business in the unusual.” Many small businesses are struggling, and small business owners face particular challenges due to either drastically reduced business volume or temporary closures.
In order to survive and hopefully thrive, most businesses have adjusted their strategies in some way. You may have already ramped up your virtual services and instituted curbside pick-up or delivery. Another important part of your business strategy should include communicating with your customers regularly, via your website, blog, social media (post often), email or direct mail. Let them know that you’re still open for business and how they can access your goods or services.
Perhaps most vital to keeping your small business in business is maintaining a positive cash flow by maximizing cash inflows and minimizing cash outflows. Here are a few tips:
Ways to Maximize Cash Inflow
- Collect sooner – Ask for prepayment of goods or services or make payment due upon delivery or within 30 days or less. Draft a company policy for late payments and note on your invoices when payment is due and at what point interest will be charged. Put a process in place for following up with late or delinquent payers.
- Offer alternative payment methods – Consider taking credit cards, being sure to increase your prices to cover the fee you pay. Providers like Clover Go Merchant Services offer a variety of options to manage business payments.
- Encourage cash payments – Offer a discount to cash customers, equal to the fee you’d pay for a credit charge.
- Get creative – Options like layaway payments are back in vogue, allowing the seller access to the cash before incurring the cost of the product. Check with your accountant before implementing a layaway program in case of any needed special accounting treatment.
Ways to Minimize Cash Outflow
- Repair rather than replacing – If it’s broke, fix it. Establish an in-house maintenance program and contract with a local vendor for bigger, more complex jobs.
- Buy Used – Look for preowned equipment in good condition. Check local advertisements, auctions and companies that are selling off equipment.
- Control your inventory – Run lean and track your inventory, replenishing as needed instead of investing funds in inventory.
- Hold off on upgrades – Delay product upgrades and opt for open-source software if possible while keeping the safety and security of the software as a top priority.
- Work with your suppliers – Negotiate better payable terms with vendors, including extended payment terms or discounts.
Your lender and your accountant are two of your most important partners in navigating the maze of the new normal. Meet with your accountant so you know where you stand with your finances. Go over your budget and financial statements and review your accounts receivable, accounts payable, rent and tax obligations.
Additional resources are also available for small business owners. The U.S. government’s Coronavirus Aid, Relief, and Economic Security (CARES) Act provides assistance for small businesses and the Small Business Administration (SBA) offers a variety of guidance and resources as well.
While no one knows what the future holds, the coronavirus pandemic has certainly changed the business landscape. Adjusting your delivery options, boosting your customer communication, maintaining a positive cashflow, and working with your accountant and lender are all essential components in surviving the COVID crisis and keeping your business viable, now and in the months and years to come.
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