COVID-19 Killing Your Cash? 10 Ways to Increase Business Cash Flow

Cash flow is the lifeblood of your business. Without a constant stream of funds pumping, the gears that keep your business moving can quickly grind to a halt.

Over the past few weeks, it’s become apparent just how harmful an impact a crisis like coronavirus can have on the livelihood of many, many small business owners.

The real question is, what can your business do to counteract the catastrophic economic effects of coronavirus? That's what we're here to discuss... 

How coronavirus is impacting business cash flow

Whether it’s a result of government-mandated shutdowns, disruptions in supply chains, or a reduction in consumer spending, it’s clear that the coronavirus pandemic has had (and is having) a dramatic impact on cash flow for thousands of small businesses across the country.

Sales are drying up across entire industries, and many business owners are impatiently waiting for the federal financial aid for coronavirus they’ve been promised. As the clock continues to tick, the ability for many business owners to meet their permanent working capital needs is being undermined.

Note: Some industries are being harmed by the crisis, while others may actually be benefitting. Get a clearer picture of the coronavirus impact on the small business economy to understand how your industry is doing.

Indeed, even before the coronavirus outbreak became “a thing”, cash flow was a pressure-point for many small business owners. In fact, data shows that the top 25% of small businesses in the country only have enough cash reserves to survive 2 months during an economic crisis. Additionally, more than 80% of small businesses reportedly fail as a result of poor cash flow management skills.

For small businesses that were already operating on tight profit margins, this unprecedented economic downturn paints a dark picture. But there’s still some light shining at the end of the tunnel - don’t give up!

Here we go into how your business can improve its cash flow even during the coronavirus crisis.

10 Ways to Increase Business Cash Flow During the Coronavirus Outbreak

The wave of shutdowns that is sweeping across the country is leaving a trail of hurting small businesses in its wake. Fortunately, there are strategies that can help mitigate the financial pain felt by the average American business owner. Use the tactics below to help keep your business’s cash flow in the black during the coronavirus outbreak.

1. Review your current cash flow

Gaining a clear understanding of your current cash flow is absolutely essential, regardless of whether there’s a disaster taking place or not. That said, the effects that the coronavirus is having on small businesses are changing rapidly. In order to make informed decisions, business owners need to review their present cash flow and also revise cash flow forecasts in relation to the current circumstances. These steps can help to reduce the impact that the pandemic may have on your business.

2. Check if you have the option to defer payments

COVID-19 is impacting the economy at-large. Consider reaching out to your bank, loan provider, or utility company to see if they can offer any flexibility in terms of deferring payments

3. Collect your accounts receivable

Reaching out to customers who owe you money is one sure way to give your cash flow a healthy boost. If you’re having difficulty dealing with unpaid invoices, invoice factoring can be the solution for you. On the same note, your customers are likely also facing difficult financial situations right now. For their benefit, this may be a strategy to hold off on until you try out some others first.

Note: To encourage your non-paying customers to make payments, consider offering them a discount for making payments during this crisis. It will help them avoid the full amount they owe you, and help you by bringing in some cash (which is better than none!).

4. Cut costs

As shutdowns continue to wreak havoc on the economy, finding new sources of business can be a stretch. An alternative to increasing the amount of money coming in is to reduce the amount of money going out. There are a number of ways to cut costs for your business during the coronavirus shutdown. Take a few minutes to review and think about the cost-cutting strategies your business can make use of.

5. Make the most of government initiatives

With the passing of the CARES Act at the end of March 2020, small businesses across the United States were introduced to new programs specially-shaped to help them weather the financial storm caused by coronavirus. More specifically, the SBA has applied several revisions to the already-existing Economic Injury Disaster Loan (EIDL) program and added a whole new program called the Paycheck Protection Program (PPP).

Note: You may decide that one or the other is best for your needs - or you may decide to apply for both. Either way, be sure to scratch up on how the PPP and EIDL programs compare and contrast.

6. Consider quick capital from credit cards

Credit cards are among the best financial safety nets that you can have in place to protect your business’s cash flow. During a crisis like the one we’re currently experiencing, it can be tough just to meet the task of covering basic expenses. When you mix in the unexpected costs that can pop up along the way, it becomes clear that having a flexible form of business financing is of the utmost importance. Credit cards can provide the flexibility that your business needs at this time.

7. Work with suppliers to extend payments

We can pretty much guarantee that your suppliers are also under quite a bit of pressure during this pandemic. Make no mistake - they need your business as much as you need their services. Take this opportunity to reach out and renew your relationship with your suppliers. They may be willing to make exceptions to your existing arrangements in an effort to keep you as a client. That can mean deferred payments or reductions on current costs until the market regains some stability.

8. Reach out to your current lender

Nobody could have predicted how devastating this outbreak would be - your lenders included. The same way that your suppliers depend on your business for their own survival, so do your lenders. If your business defaults on loans and fails as a result of stretching your finances out too thin, your lenders will also lose out the money you owe them. Don’t hesitate to call your lender(s) and speak about rearranging your payment schedule and perhaps even enacting a grace period for a short time.

9. Check your workers’ capacity

The coronavirus crisis has forced many employers to have their employees work from home. Naturally, the question of productivity arises when you’re unable to monitor how your employees are performing in real-time. To ensure that your staff is working up-to-par, schedule regular check-ins with them. Ask them what may be slowing down their workflow and how you can resolve those issues. Even if they don’t have any problems to report, you’ll instill trust, respect, and morale by maintaining regular communications with them. Keep your workers engaged and productivity will follow.

10. Turn assets into cash

We left this strategy for last because it’s probably the one you’ll want to avoid unless absolutely necessary. Your assets are the valuable pieces of property that your business may quite literally depend on for survival. That can include the machinery needed to do work, the vehicles used to make deliveries, or even the real estate where you base your business operations. Selling off your assets can be a reliable way to simultaneously bring money in while trimming costs that are associated with holding onto the property (e.g. insurance, maintenance, mortgage payments, etc.).

The more you know, the more you grow

The strategies listed here are going to be useful in your efforts to survive this economic earthquake. But this is article is just one small piece of guidance. Staying up-to-date on where the coronavirus situation stands in relation to your small business is a key step to making it through this time. Be sure to check out the following pages to keep you and your business aware of how the situation progresses:

1. Bookmark our COVID-19 Business Funding News & Updates hub

2. Join our COVID-19 Business Community Center to interact with other business owners

This post first appeared on the Become blog at https://www.become.co/blog/10-ways-to-increase-cash-flow-for-your-business-during-the-coronavirus-outbreak