The coronavirus crisis is potentially catastrophic for many small businesses. Even if you are insured up to the hilt, there are likely to be a few weeks or months lag before the funds arrive to fill the gap. Or more likely part of the gap. So what do you do in the meantime, as you watch your business prospects fall off a cliff? Every situation brings its own complexities and we don’t begin to claim to have all the answers, but here are some fundamental coronavirus cash flow crisis management steps to consider:
1. Claim any government support available
Government and local authorities have a raft of measures to help businesses survive catastrophic events that threaten the wider economy. Measures to support businesses through the coronavirus crisis include business rates relief, loan and grant schemes, assistance with sick pay and grants towards 80% of furloughed staff salaries. There is also an income support scheme for the self-employed. Unfortunately, some self-employed workers, like many of those running single director Limited Companies are not well-covered by those measures. If you don’t qualify then do check out what is available from the Universal Credit scheme, which has been enhanced for self-employed people during the crisis. Above all, make sure that you are fully informed about what help is available and apply quickly for any suitable support.
2. Adjust your business model
Consider how you could adapt your business to operate within the constraints of the crisis. Increasing your online offer and offering home delivery services are obvious routes. If you are in retail, then it’s high time that you integrated an online offer alongside your physical premises. This might be the push you need. If you are in services, could you offer online tutorials, performances or training? More than a few yoga and exercise classes are doing better than ever since going online.
3. Tighten your belt and reduce costs
Slash all and any unnecessary costs as quickly as you can. Be careful not to cut essentials. How will you get back on your feet if you let go of essential staff or equipment?
Try to delay or reduce any money flowing out of the business. Communicate promptly with vendors, explain the situation and try to negotiate delayed terms. Remember that your suppliers have a vested interest in the long-term health of your business and if they are in a position to work with you many will do their best.
If you’re self-employed you need to be cutting down on your personal expenses as well as business outgoings. If you have existing debts it is time to get on top of them. List all of your debts, contact providers and try to negotiate a payment holiday or interest rate reduction. If you are finding it hard to stay on top of a number of payments, it may be time to consider a consolidation loan. Check out Crediful.com for debt consolidation loan companies that may be able to help.
4. Speed up cash collection
If you are due outstanding payments into the business, it is time to speed them up. Depending on your industry, this will be either a carrot or stick approach, or a combination of both. If you can, start with the carrot. Explain to customers that external events mean that you need to ask for prompt payment – as a result if they can pay within the specified term you can offer a discount. Make it very easy for customers to pay, including mobile and online payment options. Obviously if that doesn’t work, you’ll need to step things up with frequent reminders. Call them daily or turn up in person if necessary or possible.
5. Sell non-essential assets
If you have anything of value, that is not mission-critical, put it up for sale. This could include equipment, websites, premises or vehicles. Think of your business as a body hemorrhaging cash, you need to get it a transfusion of new money as soon as possible to keep it alive.
6. Keep on top of your cash flow
Keep your cash position under tight review, so that you can act quickly and make well-informed decisions. A solid cash flow understanding will also stand you in good stead if you need to contact your bank for assistance. You can download a good cash flow forecast template here.
Any crisis is a shock to the system. Follow these steps and, hopefully, your business will emerge from the coronavirus crisis leaner, resilient and ready for the challenges ahead.