How to Improve Your Business’s Cash Flow in the New Year
The new year has already started, but we are still seeing more COVID-19-related uncertainty ahead, and many small business owners are fearing the worst. Everyone is experiencing payment challenges, but luckily there are several things SMEs can do right now to maintain a healthy cash flow. We’ve prepared some tips that will help keep the right things in focus.
Keep up to date with COVID 19 guidance
The Government has published an in-depth online resource to address support for businesses. You’ll find everything you need to know about the Government’s package of measures here. You might also want to save this page which is the Government’s COVID-19 information portal.
Update your financial statements
If your business’s financial statements are not already up to date, now is the time to get them in order so you can make the best financial decisions. An up-to-date balance sheet, profit and loss statement, and cash flow statement will enable you to correctly evaluate the financial state of your business and make informed choices.
Make a list of all the possible impact zones of your business and create mitigation strategies for them
COVID-19 is an unprecedented situation. For SMEs, one of the worst things about the pandemic is the uncertainty surrounding it. You should list the things that could impact your business in the future and plan for them with a mitigation strategy. This way, you will have some resilience should the worst happen. Consider thinking about:
How can you reduce the impact of a downturn?
COVID-19 is likely to make some of your employees sick. Could you cope if this happens? Could you keep the business running while short-staffed? Could they work from home?
Your suppliers could face the same problems as you. Your business may be badly affected if your suppliers are in severely impacted areas of the world. Think about bolstering your supply chain and creating redundancy plans.
Do you have enough cash in the bank to pay wages for a few months if you generate no revenue at all? How long could you sustain your operations with a 50% decrease in revenue? What can you do to bolster your cash reserves?
Act now to improve cash flow
After you’ve made a list of all the things that could impact your business, your attention should turn to cash flow and find ways to improve it.
There are several opportunities to do this:
Take a stock count to know exactly what you have and what you need. This will help you avoid unnecessary expenditures.
Take steps to increase sales while maintaining a profit. Consider special offers to drive up demand.
Reduce your stock orders if you don’t have the demand. There is no point paying for stuff you won’t be able to shift.
Increase purchases of stock that you have reason to believe will continue to sell well during the COVID-19 crisis.
Get rid of old and slow-selling stock as soon as possible so you can focus your efforts on shifting faster selling, higher-profit products.
Cut back on your advertising spend if it doesn’t give you a return.
COVID-19 is an unprecedented situation, and all business owners are facing great uncertainty right now. In times like this, it pays to be savvy and resourceful while taking a higher level of interest in the smallest workings of your business. We wish you well and hope to see you on the other side.
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