As a business owner, you may be looking at the current coronavirus outbreak and wondering when the global lockdown on economic activity will be lifted. Yes, the COVID-19 global pandemic has adversely impacted many businesses, who are dependent on regular cashflow to run their daily operations.
But, amidst the dark cloud, there remains a silver lining. These challenging times also provide an opportunity to streamline your monthly cashflow and focus on the areas that are of the highest priority for your business. And what better way to do so than selecting virtual platforms that can enable you to reduce your business costs and save some money.
Let’s understand how you can smartly manage your cashflow through these six easy steps –
How to Manage Your Cashflow Effectively?
Here are six ways you can optimize your business and consolidate your business during the current crisis:
- Monitor your accounts receivable: No matter which product or service you are providing, you have to deal with cash or payments flowing in or out of your business. To improve your immediate cashflow, monitor your current accounts payable, and follow up for pending customer payments. During this crisis, many customers may delay – or even avoid – payments simply because their businesses have also been affected. You can try offering discounts to customers making payments before the due date. Additionally, follow up proactively with your customer to enquire if there are any issues with regards to fees and whether they will pay you on time.
- Negotiate your vendor payments: As a business, you have to make timely payments to your vendors at all times. If you are facing a cash crunch in your business and are unable to make vendor payments, it’s best to reach out to them and try to negotiate a payment term extension or a higher grace period. Communicate with your best vendors and negotiate for better prices and discounts on their products or services. Try signing them up for long-term contracts so that you get a better business deal. If you have rented office space, negotiate with your landlord if they can wait longer for their rent. If you are working with many freelancers or temporary workers, it’s advisable to make timely payments each month as any delays could seriously damage their livelihood and also your business reputation.
- Provide your business services virtually: Thanks to social distancing norms and lockdown restrictions, many “non-essential” services cannot be operated out of a retail shop or any such premises. In such extreme circumstances, many businesses have been left with virtually “zero” cashflow. You can try improving your cashflow by offering your services using technology. For example, if you are running a pet care shop, you can do video conferencing with your customers to show how they can take care of their pets. Other technology-enabled modes of promoting your business would be through social media channels or direct emailing to your customers. These activities will maintain customer engagement with your business brand.
- Reduce any unnecessary business spending: For immediate business sustainability, review all your outgoing business expenses and only retain those that are critical and necessary for your business. For the immediate future, avoid any unnecessary spending that will not attract any legal action or negative response from your customers. As an example, retail businesses often end up buying too much inventory that can block your cashflow. Maintain an optimum level of stock and order more only when you need it. Try reducing your existing inventory through discount selling, so that you can bring back some cash into your business.
- Review your payroll costs: For any business, putting together a great team takes a lot of time and effort. Unfortunately, salaries and other payroll costs are a significant cost component for any business. In these times, you don’t want to fire your best employees, but it’s still critical to manage your payroll costs and see that it does not cripple your business. Apart from employee layoffs, you can consider freezing all new hires for the immediate future or impose a 20% salary cut for high-earning employees. As a business owner, be the role model by reducing your monthly salary and forgoing other work-related benefits.
- Look for additional finance options: As a business operating in the current indefinite lockdown, you will need additional finance-related help from your bank or local government to sustain your business. If available, enroll your business for any local or central government program designed for helping SMEs deal with the economic fallout of the current outbreak. You can also consider any tax rebate program from the government, which allows you to delay (or avoid) your business tax payments. You can also raise additional cash for your business through bank finance schemes like working capital loans and other business credit facilities. If you are servicing a bank loan, speak to your bank executive and try to work out a more beneficial repayment scheme.
In summary, these are just some of the ways by which businesses can manage their cashflow during the current outbreak.
We know that these are distressing times, and businesses are taking a major impact. Which is why we are here to solve your problems in the best way possible. Consider FinGurus – a virtual accounting platform based in the city of Bangalore that can enable SMEs and start-ups like yours to optimize their cashflow and financial operations.
Contact us today.