During the outbreak of COVID-19 in early 2020, many businesses had suffered their greatest economic shock of all time. The economy worldwide has taken an unexpected turn and business owners have been facing extreme challenges, including managing their cash flow.
Cash Flow Challenges
- There has been an unexpected sharp drop in company revenues. This has occurred due to the closed borders, government lockdowns and decreasing demand for goods and services. For some companies, the revenue dropped in a week and for others, it has decreased gradually but is equally damaging.
- The COVID-19-created a surge in online purchases which has helped many e-commerce companies to grow. But for companies that did not shift to online selling, they suffered from lost cash flow.
- It was especially challenging for service providing companies. These sectors generally involve in-person contact, and it can be very challenging for these businesses to continue operations when physical distancing needs to be maintained. Demand falls down in these cases, as well as revenue.
Sustaining cash flow
In order to sustain cash flow, you immediately have to manage costs and revenues, so that your cash flow can keep your business going until the pandemic conditions improve. Below are some successful strategies that might work for you:
Take a close look at your situation to determine clearly what your cash flow position really is and for how long you can operate under the given conditions.
Understand where you are
Conserve your cash resources
Look at your business’s cost structures, analyse your accounts receivable, collect advance payments, check if your suppliers can defer payments on goods you’ve already ordered or received, etc.
Find more revenue
- If you have assets you might not need anymore, try to sell them.
- Try to develop strategic alliances with other businesses to create increased value for customers which can increase sales for both businesses.
- Ask your existing clients for referrals to new potential consumers.
Cash flow management can help you predict how much money will be available to your business in the future & help you identify how much money your business needs to cover debts, like paying staff and suppliers. This is especially more vital after the global pandemic. At SMG, we have the ability to build an iterative model of finance, to test the real cash flow status of the business and the associated factors that determine your growth. We aim to support all types of businesses to improve cash flow and pay lower taxes due to the impact of COVID-19 on businesses.