How to improve your cashflow during COVID-19
COVID-19 took the world by complete surprise! In this pandemic there are no real winners because everyone is affected to some degree and businesses need to adjust quickly to the ‘new normal’. In times like these, cashflow becomes increasingly important to the survival of businesses. Here are 10 tips to deal with the immediate challenges:
Ensure customers pay on time
Check your collection process is working efficiently, ensuring customers are getting accurate and timely invoices so they are fully aware when payment is due. Any errors in your billing process can lead to costly delays in receiving payment. If cashflow is really tight, you could offer discounting solutions for customers that are able to pay more quickly.
Revisit your marketing
Make sure your marketing is relevant to the ‘new normal’ that COVID–19 has created and all communications are sympathetic and sensitive. Keep in touch with existing customers about how services are going to work safely and create deals to keep them coming back to you. Ensure you have robust processes in place to follow up on any marketing leads, with timelines when emails, phone calls and mailings will happen. Create incentive plans for referrals and regularly communicate with partners.
Identify and action any bad debts
Identify and talk to any important customers to ensure there are no blockages to your business receiving payments. Ensure your procedures to collect bad debts are robust, starting with a series of gentle reminders and payment negotiations, before considering any legal action.
Improve your operating margins
Ensure you are receiving the best deals from suppliers, taking advantage of any discounts that are now available. It is a good idea to talk to a number of suppliers before choosing who to buy from. When checking your supply chain identify any potential disruptions due to shortages; try and stock pile anything that could be a problem.
Revisit variable costs
It is much easier to quickly reduce variable costs, by imposing hiring freezes and placing restrictions on discretionary spend like training. If your costs for labour are significantly high then look at ways to reduce spending while avoiding layoffs. For example, reduce contractors and re-distribute work to your permanent staff or encourage employees to take leave. Look how you can automate processes to make operational cost savings and make life easier.
Extend any payment terms where possible
Keep a close eye on administration and general expenses; there are some payments that can wait and some you must keep paying such as business insurance and professional indemnity. Negotiate more preferential payment terms from suppliers where possible; try not to just enforce them because this may damage your relationships with these suppliers.
Consider alternative products and services
Consider ways you could change your revenue stream whether that is changing the products or services you sell or maybe changing your focus from an international market to a domestic one. Have you adopted systems and technologies to work online, so you can continue to meet the needs of your customers?
Check your own financing
Plan in detail how much cash you will need in the future and for how long. Take this opportunity to engage with your financing partners to check if your available lines of credit are still open and remain beneficial or explore new options.
Revisit all future capital investment plans
Check to see if all investment plans are still required and if any can be postponed. Identify which ones are still essential for the future success of the business.
Convert fixed variable costs where possible
Sell any capital assets you own and lease them back to release some emergency money.
I hope this information helps your business though these difficult times.
Director & Managing Partner
Grace Certified Accountants