The 2020 coronavirus crisis is the worst nightmare for small businesses. Most of them have witnessed a decline in sales and disruption in operations, which has significantly impacted the business cash-flow.
It is indeed a tough time for small businesses. However, no business is immune from such an unexpected crisis.
Over a decade ago, several small businesses were affected by the Global Financial Crisis of 2008. They juggled through many challenges back then, but they survived.
- Don’t let the crisis break you.
- Cultivate optimism in the face of adversity.
- Accept the situation and act quickly.
- Gain control over your cash-flow and extend your runway.
You need to keep your business running, and managing your cash-flow is the best way of doing it.
“Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence” — Helen Keller
Manage cash-flow and extend the runway
During a crisis, you need to play smartly by extending your available resources and reducing your spending. You need to walk the extra mile and put more effort during this crisis.
Yes! Managing and improving cash-flow would seem challenging during this difficult time, but it isn’t impossible. You just must take a few necessary steps for managing your cash-flow and improving your runway.
Manage cash-flow
Cash-flow is a key concern for the business. Here are a few suggestions to improve your cash-flow management and improve cash-flow during the COVID-19 crisis.
1. Track your account receivable carefully
This is the right time to look at outstanding invoices. Do you remember those customers whom you delivered the product on credit with an understanding that the amount would come after 30 days?
If any significant receivables are overdue, then immediately take action. Make a list of customers who owe you money and connect with them quickly.
2. Negotiate with vendors.
Maintaining a healthy relationship with the vendors can be very helpful during such difficult times.
Do not be hesitant in calling your vendors for negotiating the terms of the contract. You can request more time to pay the bills.
As they are aware of the situation, try to check if any discounts are available on the current purchase for long-term purchasing commitment.
There are chances that you might receive a negative response but make sure you try once. There is no harm in trying.
3. Purchase less inventory and sell non-critical assets
Well, do not make the mistake of purchasing too much inventory due to the crisis. Right now, spend only on inventories that are necessary for your business.
Besides, if there are any assets that you are not using, then it is time to sell it and recoup some of the cash.
Extend runway
You have no clue how long this crisis will last. So you have to extend whatever you have for as long as you can until things get back to normal.
1. Build a new budget
Every penny is essential to your business right now. So, be careful with your spending. Create a new budget that redefines priorities.
Make sure you track the cash balance at the most granular level while building the budget. Spend only on necessary things.
Analyze and spot the areas where the expenses can be cut or reduced like travel, marketing, software, and external consultation.
Managing your spending in the best way to get your burn rate under control.
2. Keep a track on your spending
Yes, you did proper financial planning to save you precious dollars but are you sticking to that plan. At the end of every week, check where you have invested your money.
Are you still spending on things that are not necessary for your businesses?
Do you still have a scope to reduce expenses?
Track your company credit card bill. It might seem enticing to swipe the card from buying new assets.
However, this is not the right time for unnecessary investments. The next few months are unpredictable, so you cannot afford to exhaust the resources you have.
3. Spot economic uncertainties that could affect the business
It is necessary to plan for the future. Identify the key economic uncertainties that could impact your business in the next few months.
Invest time in scenario planning for determining the best, middle, and worst scenarios for your business.
Stay prepared for the future by outlining various scenarios that could negatively impact the business and plan the steps needed to minimize the damage.
Wrapping up
The COVID-19 crisis is a phase that will pass. To survive the crisis, you need to stay positive and take necessary actions in real-time. Managing cash-flow might seem a little challenging during the ongoing crisis. However, it isn’t impossible.
Create proper financial plans and extend your runway. Monitor the execution of your financial plan to ensure you are on the right track.
Try to reduce unnecessary expenses. Save as much as possible; you never know what the conditions will be in the coming months. So be careful with your spending and manage your cash-flow efficiently.
Recommended reading: Creating KPIs for your sales team’s success
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