The emergence of Covid-19 has hastened the world into a new normal. We’ve found new ways of socializing, working, and learning as we try to keep ourselves, families, and businesses afloat.
Many small businesses have found unique and different ways to pivot, serve customers, and keep their doors open. However, an unprecedented number of small businesses still struggle or, even worse, have closed.
In a bid to survive and thrive, many businesses have switched their strategies in specific ways to survive. Managing cash flow remains critical to success. In fact, 82% – that’s right, 82% – of businesses fail due to poor cash flow management. So Method Man said it then, and say it again- Cash Rules Everything Around Me. Let’s get to business understanding how to get a handle on your cash flow in unprecedented times.
1. Take a long, hard look at your business.
Understand how much cash you have, how much you will need, and for how long. We get it – you are putting out fires daily. But clarity allows for better planning, even if it’s not pretty.
2. Examine accounts receivable, get flexible and creative when collecting unpaid invoices.
Its essential advice – have grace. When you ask your customers and clients to pay on time, know that they may also be in a difficult position. Offer brief installment terms for those that need it. Incentive clients to prepay and get cash in your hand right away. Get in the habit of developing a discipline around invoicing clients by setting a visible schedule. Here’s a tip: Record and track sent invoices, match to payments received, and make a note of delinquent payments. Follow up with a plan. Don’t leave money on the table by allowing invoicing to pile up.
3. Vendors, suppliers, and creditors need to hear from you.
Remember those incentive and flexible payment terms you offered to some or all of your customers? Well, it’s time to make the same request of your vendors and suppliers. Look at your relationships and business needs, and start to contact vendors or suppliers to negotiate speed, rates, and amount of payback terms. Tip: Stay in close contact and keep them abreast of any challenges you may face that will affect them. Remember, we are all in this together.
4. Control your inventory.
If you have excess inventory on hand, now is the time to try to sell it. Track your inventory, replenish as needed, and only purchase when required. For some businesses, excess inventory means storage, and the costs can add up.
5. Utilize a line of credit to fill cash flow gaps.
Did you know that a business line of credit is often a useful tool to manage cash flow? If you have an existing line, now could be an excellent time to drawdown on it. Use it as a bridge until client payment arrives. Once paid, replace funds immediately. Though it is a special tool, use your line of credit thoughtfully and cautiously.
6. Explore your loan options.
The government stepped in with PPP, and we know that many people, including women and businesses built by people of color, were not able to take advantage of it. There are many loan options available, from SBA loans to Community Development Financial Institutions to banks and online lenders like GenEQTY. Do your research first and find an option that works for you.
We don’t know what the future holds, but we know that many of our lives have been forever altered by this pandemic. Yes, adapting to new delivery alternatives, improving customer communication, and managing your cash flow are vital components to surviving this and any crisis. But they are also suitable foundational lessons to keep your business running smoothly for years to come. Protect yourselves and your relationships. Be kind when doing business, and no matter what – don’t give up.