Five Tips To Solve Small Business Cash Flow Problems During Covid-19 Pandemic

The worldwide COVID-19 outbreak hit suddenly, causing upheaval to all areas of the economy, especially in small businesses. The virus has forced to bring travel to a halt, close cities, all employees to go remote and has reduced demand for everything but basic necessities. All of these are negatively affecting most organisations and decreasing the ability of businesses to generate income.

As the whole globe grapples with the pandemic, many businesses are put to the test as they are operating in long and uncertain timeframes and facing significant cash flow management issues. In times of great uncertainty, the success of your company depends on how quickly you react and adapt to this ‘new normal’.

If you are experiencing cash flow problems in your small business as a result of coronavirus, here are a few potential solutions to keep your company cash flow as strong as possible during the pandemic.

Estimate Your Current Financial Situation

Before you can figure out where you can make short-term changes, you need a thorough assessment of your organisation as it stands. This financial analysis should include the most recent information on key aspects of your business, including:

• Annual and monthly revenue and cash flow forecast;
• Liquidity ratios (this ratio shows how much of your assets can quickly be transformed
• into cash if needed);
• Review of turnover forecasts based on emerging business trends resulting from COVID-19;
• An accurate estimate of all costs and expenses;
• A complete and detailed picture of your current debt.

Reduce Your Costs As Much As Possible

As soon as you have a more holistic view of where your company stands, you can start working on solving your most pressing cash flow problems. Remember that cash flow refers to both the total amount of money received through sales and the amount of money that remains through your expenses, so you will need to think about where you can reduce costs.

To start cuts, list all your variable and fixed costs. Depending on your field of activity and business model, it is usually easier to cut variable costs than fixed costs, so try to tackle those first. Can you find a less expensive way of shipping your products? Can you temporarily reduce sales personnel commission and incentivise them in another way? But also think about how you can actually change the fixed costs for the variables. When all else fails, try cutting out literally everything you don’t need.

You might also consider taking your business online rather than renting a physical space to save on costs, based on the terms of your lease. Furthermore, if your marketing budget has been affected, there are also many free online resources to help you promote your company through your website and existing social media accounts.

Update Your Cash Flow Forecast Regularly

Your financial statements may seem pretty grim at the moment, so much so that it would be tempting to ignore them entirely. However, now it is more crucial than ever that you have an accurate and up-to-date picture of the financial situation of your company.

Consider updating your cash flow forecast regularly and creating a best- and worst-case scenario that takes into account the decline in sales as the situation develops and the impact of bad debts or late payments on your cash position. You need to understand how much money your organisation can use, what expenses you have, and what expenses you can try to cut back. Then you can think about what kind of external assistance you might need before the situation becomes critical such as requesting payment deferrals from your suppliers and vendors.

Apply For Available Financial Assistance Programs

Even if you can put some of the tips above into practice, it will probably be challenging for you to maintain a healthy cash flow for your small business during these uncertain times. Most companies will still need additional financial assistance. Fortunately, there are several local, state and federal financial programs that can help small businesses cope with the fallout from the coronavirus outbreak.

For example, the Coronavirus Business Interruption Loan Scheme (CBILS) provides fast and flexible financial support for both small and medium-sized UK businesses through the coronavirus crisis. Whether you are looking for regular capital to meet current financial commitments, launch a new project, accelerate growth, hire more employees or move to a bigger workspace, the CBILS scheme offers two different types of financing, such as CBILS loans or CBILS revolving credit facility to help your business thrive in the face of this pandemic.

Consider taking advantage of as many loans as your business is eligible for, to keep your funds safe. This will help to save much-needed money, which you can then use again in business.

Empower Your Team

As a leader of your company, now is not the right time to hide behind a laptop screen at home or in the office. It’s time to step forward and take the lead by empowering your employees to step up too. Therefore, try to be transparent about your actual business metrics and what goals you need to achieve. When you are transparent about what needs to happen to keep the business afloat, and in particular your cash flow goals, you show how much you respect and trust your employees, you empower them to work together to accomplish those goals.

To truly empower your employees, you also need to make sure all of your workers understand what the metrics mean. Show your staff a profit and loss statement and explain how exactly it works. Additionally, walk your team through a balance sheet and describe the difference between profit and positive cash flow and why the last one is the highest priority for your business right now.

Also, make sure everyone in your company understands how they are personally influencing the business. Encourage all fresh ideas, new and strategies and emphasise that the work of each member of the team is important and relevant.

By showing transparency and openness to new ideas and taking the time to educate and empower your team, you are investing heavily in their resilience, unleashing their creativity and increasing motivation to address your business’s challenges.