4 Techniques to Better Manage Your Cash Flow During COVID-19
COVID-19 has shut businesses down, and if you don’t properly manage your cash flow, you might be the next one to close shop. Your ability to maintain a positive cash flow can make a huge difference in whether your business will persevere or not and survive this pandemic. It can help you adapt to the changes in the unpredictable economy, while the opposite can severely limit what you can do, increasing your risks.
Even if you’re a small to medium business, there are still a few techniques that you can use to manage cash flow during COVID-19 and keep your business going. These include the following:
1. Cut down on as many expenses as possible.
Regardless of the size of the business, there will always be fixed costs and variable costs. The fixed costs include routine expenses that don’t change with sales, while variable costs fluctuate with your sales. The second type might be easier to tackle, so find ways to cut variable expenses down. Reduce or remove anything that your business doesn’t need.
It might help you manage your cash flow if you sort your liabilities, may it be with your suppliers, employees, or landlord. Be upfront about your ability to pay your financial obligations and discuss how you might be able to extend your payment terms. This is much better than ignoring your accounts payable when these businesses might be struggling financially, too.
2. Find business aids and alternate financing.
Don’t be hesitant to ask for help. Fortunately, the Philippine government and other organizations have provided measures to protect small businesses. First, bills, loans, rentals, and tax filings have their deadlines moved to a later date.
Second, organizations like the Small Business (SB) Corporation reopened its COVID-19 Assistance to Restart Enterprises (CARES) Program on August 17. Now called CARES 2, it still has the same loan limit, service fee, zero interest rate, repayment term, and grace period as the first run of the program. You can inquire with the organization to know more about the requirements for application.
Third, take the initiative to research more sources of funding. You could take out a loan if it means strengthening your business’ foundation and bracing yourself for the next few months. You could also open a line of credit to help manage cash flow during COVID-19. This is an ideal arrangement if you’re waiting for payment from a client but need to fulfill some urgent financial obligations. When you receive the funds, make sure to pay what you owed so you can use the line of credit to manage your cash flow.
3. Focus on generating cash instead of making a profit.
If your priority is to keep your cash flow in the positive, find ways to produce cash. Offer exclusive discounts to loyal customers instead of spending money to acquire new customers. This is especially helpful if you have an inventory of physical goods that should be disposed to reduce storage or rental costs.
Another option is to change the way you sell. If you have a restaurant with regular patrons or catering business, you could deliver to your customers instead. More businesses are also going digital and offering swift delivery options to attract more buyers and generate more cash.
4. Manage your invoices and accounts receivables better.
If you’re going low on cash, establish an invoicing schedule to get more cash. Once your customers get used to paying you following a schedule, this could close down cash flow gaps.
Don’t forget about your accounts receivable. Reach out to customers who have overdue payments and negotiate with them. They could be going through the same tough times as you are, so work with them to develop a realistic payment term until they can pay in full.
You can anticipate the movement of your money better if you monitor it with the help of a bookkeeper, accountant, or accounting software. Trends will eventually show and you can manage your cash flow better even during the pandemic.
Businesses largely depend on their cash flow to continue operating, so heed the tricks suggested above to improve your financial situation. Start managing your cash flow now and overcome the challenges that this pandemic brings.