During the COVID-19 pandemic, your cash flow concerns are bound to be heightened. Our list of tips should help you to keep your head above water by giving you the tools to survive.
Accelerate your receivables
It’s important that you consider establishing a temporary framework to decrease the time which you allow clients or customers to pay you by incentivising early payment with a small discount. This will bring in money faster than usual, which will in turn, give you a little more time to make financial decisions. This can help to create a buffer if activated early on.
Review your expenses
Take a good look at what you are spending your money on. Ensure that what you are spending your limited funds on is really necessary. Would doing tasks yourself rather than outsourcing them be more cost-effective? Consider all of your options.
Consider selling your non-essential assets
Review your assets; if you aren’t going to be using that car, desk, those extra computers or the plant machinery in the compound gathering dust, consider selling to reduce your operational costs. Use the proceeds to pay down debt or to re-invest into other areas which costs more to maintain.
Take good care of your supply chain
Your supply chain is the life-blood of your entire business. Make sure that you have a strong framework to maintain your supply chain, including back-up options in case any suppliers succumb to the crisis. Make sure to regularly review your policies and standard operating practices to ensure that you stay on top of any new trends or market fluctuations which have the potential to increase your outputs.
Review your risk
Your old business plan may not be up to the task during a crisis. Make sure to review the risk associated with your financial security. Consider conducting a new SWOT analysis to determine whether your normal competition will remain, increase or decline. Your financial risk must be monitored closely to minimise your losses, even more than usual, with a lower acceptable residual risk rating. This will help you to maintain your cash flow in a manner that is more suitable to tackling a financial crisis.
Review and renegotiate debt
Many financial institutions will have certain financial hardship arrangements in order to help those in need maintain their affairs. Generally speaking, the larger the financial contribution your debt gives to the lender, the more negotiating power you may have. However, be mindful to keep paying them, otherwise while they might not be nagging you, late fees and interest may be steadily increasing over time.
Manage your inventory
Your sellable stock levels need to be monitored and maintained closer than usual. Try to pre-empt your needs and keep the right amount of stock on hand, but if possible, keep a reserve fund for ordering more in case of a sudden fluctuation in customer needs. Stay on top of trends and make good decisions.
Ensure that your ‘business interruption insurance’ is up-to-date and that you are in good stead with your insurer. If a claim has to be submitted, make sure that you have a plan in place that will outline how and when you will use the money your insurer pays you.
Explore new revenue streams
In the constantly shifting financial climate we live in, be on the lookout for future income opportunities which may be viable. Make sure that these new opportunities are going to perform in the financial crisis without too much fluctuation, as this will ensure that little bit of extra income may just save your business.
Pay your suppliers and creditors
While your business may be suffering the effects of the financial crisis, make sure to always meet your financial obligations with your suppliers and creditors. If you mistreat these, they could ultimately lead your business down a path of bankruptcy. No supplies, extra late fees and increased interest are income killers.
If your business has suffered during the COVID-19 pandemic, contact us to assess your options.
This article does not constitute financial advice.