Tips for cash flow management during this pandemic
Cash flow is the amount of money that’s going in and out of your business. Cash flow management becomes immensely more difficult when money isn’t flowing like it used to. This is often the case during an economic downturn or in situations like this pandemic when you’re forced to shut down your operations. Here are four tips on what to do to manage cash flow during this pandemic.
- Look at your numbers and make a plan; The first thing you should do is know where your business stands financially. Go through your financial statements, accounting dashboard, and retail reports. How much money do you have in the bank and how long will it last? How much of your capital is tied up in your inventory? Is there a possibility to liquidate some of your stock? Get a handle on how much you owe and when you need to make payments
- Don’t finance client projects; Stop working if client payments aren’t up to date and have that buyer and their bank commit to a plan to ensure you will have more cash in the bank before restarting work. “Don’t take the client’s word for it,” McLauchlan says. “If in doubt, get a lawyer involved and have the attorney manage funds at the client’s expense.”
- Cut non-essential spending; Identify your business needs vs wants and cut back on the latter. Expenses like utilities, marketing, retail management software are examples of what would fall into the “needs” category. On the other hand, things like travel costs, or luxury expenses would be considered “wants” and thus need to be minimized or eliminated, at least for the time being
- Make a financial contingency plan; Manage cash to the best extent possible. Consider asking lenders and other creditors for forbearance, forgiveness, or a standstill and agree to a process of keeping them informed over time. Also, monitor resources available through newly emerging economic relief packages to try to help businesses and workers affected by the outbreak.