These are not usual times and managing your cash flow i.e. the amount of cash that comes in and goes out of your business each day can be extremely challenging. However, as an entrepreneur you take steps to reduce costs and find measures to improve your cash flow.
Here are some helpful tips to manage your cash flow during COVID-19:
Invest in Technology
Explore new technologies that may help your business improve efficiency, increase productivity and reduce costs. For example, many companies have invested in cloud computing systems to help in the transition from in-house service to working remotely. They are relatively inexpensive to buy and maintain. You can also maximise your business’ efficiency by tracking your company’s productivity. Now more than ever, time is money and you need to know where your time is going and how you can find new ways to improve efficiency while giving a great customer service experience.
Reduce Variable Expenses
One of the best ways to ensure business continuity is practising cost-cutting measures. Reevaluate your business and figure out what services would be most valuable at this time and what can be retooled or cut back. Reduce your non-essential expenses. Take a hard look at your fixed expenses such as rent, electricity, air-conditioning etc. Ask your landlord to consider a rent waiver or reduction during this time.1
Reprioritise How Your Employees Work
Non-essential businesses across the Caribbean are closed, but their work has stopped.2 Crises can throw business operations into instability and one way to counteract that is to look at what is important vs. what is urgent. Now that operations are slower it is a ripe time to reactivate projects that may have been on the back burner. You can make staff available for other functions and projects geared towards improving overall efficiency. You can pivot from working the traditional 8 to 4 model and instead choose to use staff on a task basis. In this way, staff can continue working through reduced hours, business operations can continue and employees do not have to be subject to job losses.
Start Forecasting and Scenario Planning
COVID-19 is a huge crisis, but it is not the first and last crisis that your company will face. One way to safeguard your company in times of crises is to forecast and consider different scenarios. Although not all forecasting models can fully account for all the effects that COVID-19 may have on your business, it is still a good option for your business to have a plan to adjust and adapt instead of having no plan at all.
Consider Alternate or Non-traditional Revenue Streams
You can keep money flowing through your business by reconsidering the needs of your consumers and pivoting your services and products to suit them. It might be easy to assume what your customers want based on initial panic buying and other consumption patterns, however a safer way to consider alternate or non-traditional revenue streams is by increasing your communication with your customers. Be transparent and think about all your assets – your team, your product or service, your brand and how they can be used to generate new revenue sources. Not only can this help increase cash flow, it can result in a decrease of overhead costs.
Get a Picture of Your Spending
Whether you are a small, medium or large enterprise taking stock of your cash situation by calculating your payroll, accounts payable, fixed expenses, paid employee benefits is the best way to figure out how money is coming in and out of your business. Business credit cards allow you to see all your business purchases in one place – how and where you’re spending your money. Many cards come with analytics tools to provide in-depth insights into your spending patterns and expenses. Depending on the size and scope of your business, even a simple review of your statement can give you a helpful view into the ongoing costs of running your business. When you have this kind of information on hand, you’re in a better position to evaluate your spending decisions, determine where you can save money, and potentially keep more cash in your business.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.