How you can boost your small business’s cash flow during a crisis

Over the years, well-known companies have failed, not because they weren’t making a profit. But, because they didn’t have cash flow management skills, which affected their business’ lifespan.   COVID-19 has proven that no one can tell when a crisis is going to happen. Or, how it will impact businesses as well as the economy. COVID-19 has crippled South Africa’s economy with organisations closing down, a rise in job losses, and people are only spending on essentials. This has put many businesses in jeopardy, but managing your cash flow can help your company thrive through any crisis. So, here are some tips on how to deal with a cash flow shortage during a crisis.

●    Make cash flow management a priority

When dealing with a crisis, you need to ensure that the foundation of your business is unbreakable. This means ensuring that your cash flow stays afloat as it is the lifeline of any business. The importance of cash flow management is that it helps you stay ahead of any problems that may arise. There are online budget tools and accounting software available to help keep track of your organisation’s finances, and these will help you see whether you can still afford to pay your bills, workers as well as supplies. Not managing your cash flow can cause you to miss important information that could have been dealt with if you had noticed sooner. So, make sure you know how much money your organisation has, how much is going out and how much is coming in.

●    Cut costs as much as you can

As in your personal life, you may not realise when you’re overspending on items you don’t need. The same applies to your business. One of the best tips for managing your small business’s finances is to cut costs as much as you can. This is a cash flow crisis management tip you can use even when there is no crisis. Cutting back on non-essentials items within your organisation is an effective way to reduce the outflow from your company. Take a look at your recurring expenses (monthly, quarterly and annually) to see where you can cut back. You can cut back on utilities, rent or freeze your hiring process so that you can cut back on payroll costs. There are many ways which you can cut back costs once you have an idea where the organisation’s money is going.

●    Track your account receivables

During a crisis, many people will be reluctant to pay, and now is the time to monitor your account receivables, and be stern in collecting payments. Take inventory and look at your collection process as well as identify those customers known for being late payers. If you have buyers who are always late when it comes to payments, try offering them an incentive for early payments. For example, you can run a discount for those who pay earlier than the due date. Or, a discount for those who prepay. That way, you won’t have to deal with late or no payments at all. During this time, ensure that everything on your end is above board. This means, avoid delays such as incorrect billing or sending invoices late as that will sidetrack all your efforts of getting paid on time.

●    Consider a business loan

Applying for a line of credit may be the last thing you want to do right now. But, it can also help your business if it is suffering. Filling in a business finance application form may be the only way to boost and improve your cash flow until things go back to normal. No crisis lasts forever, but a negative cash flow might be detrimental to your business without any help. If discounts and cutting costs are ineffective, it may be time to get a business loan to help with your cash flow problems until things begin to settle.

●    Speak to your suppliers

Prolonging your account payables may be a good way to manage your cash flow, but it can cause problems between you and your suppliers. To ensure your relationship with your vendors is safe, it’s best to have an open and honest conversation with them of where your business is at currently. An honest conversation can help you reach an agreement, such as getting a discount or an extension. That way, you aren’t burning bridges that your company might need in the future.

●    Only restock when you need to

There is a possibility that when you restock, you purchase more than you require. That may have been helpful before, but now you need to rethink whether this helps your business. Customers and companies are also cutting costs right now and might not be in need or need less of your services or products. To save, try and only restock when you need to. This will give you some legroom in the money department so that you can put it towards other items your business needs.

●    Consider other revenue streams

Finding another source of income can help improve cash flow management for your business. Although you might be sceptical about coming up with an additional product or service, it can be helpful to your company. As much as you are faced with a crisis right now, this means that peoples’ needs have changed. Therefore, your business can find ways to fulfil those “new” needs. If you were unsure about taking a business loan to help with your cash flow, then taking business equipment financing can be a better option for you. This will allow you to purchase the equipment that can either ensure your operations are faster, which in turn means more efficiency or help create a new product or service. For example, if your business offers faster delivery now that you have the equipment to fulfil that promise, that gives your organisation a better chance of attracting more customers. So, if you have had any ideas in the pipeline, now might be the best time to grow your business and create an additional revenue stream.

●    Sell assets you know longer use

If you’re applying for business equipment financing, there are assets that you will no longer need. This is a great opportunity for your business to make some extra money. Money that you received from selling assets can help your business stay afloat by paying off credit cards or helping you stick to a payment term.

Final thoughts

Taking control of your business’s finances during a crisis is important in ensuring the survival of your organisation. Although it may be overwhelming as you not only have your family depending on the success of your business, your employees and their families need work in order to stay afloat during a crisis. If you take these tips into consideration, you will find ways to boost your company’s cash flow and ensure that it survives any crisis that it’s facing now and in the future.