Cash Flow Management Tips for Businesses Amidst the Covid-19 Pandemic
The Covid-19 pandemic has affected social and economic activities globally. It has disrupted the delicate balance between sales, creditors/debtors and overheads for so many businesses. Keeping business cash flow under control has never been more challenging. However, there are a few ways you can implement to keep your business cash flowing during this crisis.
Reduce Operating Costs
Businesses from all around the world are getting support by their government for maintaining cash flow challenges in the midst of the coronavirus outbreak. You probably can apply for an interest-free loan to help your small business survive the crisis. However, you should still find other ways to manage your business cash flow before seeking government support. One of several things you can do is to minimize your business operating costs which include accounting and legal fees, sales and marketing costs, office supply costs, maintenance costs, travel expenses, inventory costs, cost of goods sold, and so on.
Sure, you can’t cut your company’s fixed costs such as rental and utility fees, but you can reduce its variable costs such as production costs, asset maintenance costs, inventory costs, accounting costs, shipping costs, and etc. First and foremost, evaluate the variable costs. Know which aspects of your business spend the most money. For example, you might have spent most of your business cash on inventory, perhaps due to high product prices, high shipping fees, and high storage and maintenance costs due to excess inventory.
Secondly, you might have to negotiate with your supplier to get discounts, or at least get lower shipping fees. Consider analyzing quotations from a few other suppliers to get the best deal. To make it easier for you to receive, track and assess quotations from multiple suppliers, use the right procurement app.
Thirdly, you need to understand how many and which items you need to purchase. Remember that unnecessary purchases kill your budget. By analyzing your procurement and inventory management using an integrated, cloud system, you will be able to accurately estimate your inventory needs and know the right time to order.
Last but not least, try to minimize time-consuming and labor-intensive processes by automating them. Reducing paper-based and manual processes can greatly help cut operating costs. For example, you may have been doing all your accounting procedures manually by relying on stacks of paper, spending too much time to fix errors on financial reports. Meanwhile, with a cloud accounting app, you can generate those reports automatically, analyze your budgets, and even estimate your business revenue.
Postpone Expansion Plans
If you already have plans to expand your business into other cities or countries, you might have to postpone them until the situation gets better. Business expansion requires large sums of money, and under these circumstances, you better use that money for more important, beneficial things. As an example, you can invest in business software to make it easier for you to analyze your business income, spend more on digital marketing optimization, or use the money as an emergency budget.
Turn Customers Into Cash
During this crisis, it makes sense to consider whether future sales should be covered by deposits or prepayments. You should undertake a review of existing customers’ orders and identify those that can be converted into cash in the quickest possible time, prioritizing the ones with the highest value. Keep an eye on orders and be realistic about which are likely to be fulfilled and which are not.
Keep Tabs on Unpaid Invoices
Late-paying customers can add more stress to your business during the Covid-19 outbreak. Although chasing them down for payment can be awkward, burying your head in the sand won’t do you any good. Therefore, don’t be afraid of reminding the late payers of their unpaid invoices. If you find it stressful to keep track of customers’ invoices, consider using an e-Invoicing app. This app gives you notifications before invoices become past due, enabling you to automatically send friendly payment reminders to your customers. Thus, no more awkward conversations between you and customers.
Keep Track of Your Cash Flow
By constantly monitoring your cash flow, you will be able to really know your income and expenses. This will make it easier for you to make forecasts for the next few months and make financial decisions faster. A cloud-based accounting app will be very helpful for you, because it helps you keep track of your cash flow from anywhere and at any time, providing you with complete, real-time data.