Covid-19 has quickly become a part of our lives this year. It’s something nobody could have predicted and has taken everyone by surprise. This ongoing crisis has affected businesses significantly with companies taking a long, hard look at staff, business risks and logistics in order to avoid negative cash flow and mounting.
Here’s some steps that can help minimise damage and keep your business afloat as much as possible.
Keep yourself informed
It is easier to control things that you have measured. Carry out an updated calculation of your business’ working capital, and consider as part of this:
• Have I sent an invoice to all the clients who are due?
• Are there currently any overdue invoices? If so, how long have they been overdue, and what are the due amounts?
• How much stock do I currently have?
• How much time is taken between paying suppliers and receiving money from customers?
• What are the most recent orders that I have placed? Are all of these orders essential, or is there a possibility of cancelling or postponing a few?
• How much cash is stuck elsewhere is the business?
Understand your financial position well
The pandemic has demonstrated that life can change in no time, and that businesses need to adapt and respond quickly. In terms of cash flow, it is important to consider the likely medium-term and short-term financial implications that arise due to the ongoing pandemic. Focus on your liquidity and covenants so that there is immediate cash flow. This will help with planning next steps, alongside reviewing all financial documents to check if you can leverage any flexibility on credit and loans.
Effective cash flow management tips
Once you know and understand your current position well, you must try to find ways to manage your cash flow effectively going forward. This could include:
Invoicing quickly:
The safest and fastest way for raising invoices and receiving payment on time is to send electronic invoices. Timing of invoicing makes a huge difference when it comes to cash flow. You should invoice as soon as work is completed, and deal with any queries in a timely manner to ensure optimal cash flow.
Considering housekeeping:
Look at ways in which you may be able to run your business more efficiently by reviewing data analysis tools and reporting.
Cost cutting:
Check your overhead expenses – monthly ones as well as those on a quarterly and annual basis. Can you cut back on rent or switch energy suppliers to save money? Check to see if there are any subscriptions you are paying for that you don’t use.
Ensuring your customers can pay you easily:
Offer your customers contactless payment options such as online transfers, card and wallet payments so they can pay you quickly and easily. Avoid cheques as they can cause delays.
If you are interested in exploring cash flow improvements, please contact Elly Rose on ellyr@hbpo.uk.com
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