The 30 million small businesses in the US have been thrown a curveball. Many have survived economic downturns and market shifts, but Covid-19 has shaken their foundations, forcing so many to close indefinitely. Data shows that by March 29th – the second Sunday of social distancing - more than half the US’ small businesses were shuttered. If you’re one of these businesses, you’ll know how critical maintaining healthy cash flow is to your operation.
Cash flow concerns
Per Intuit’s State of Small Business Cash Flow report, 61 percent of small businesses struggle with cash flow, while 32 percent have such serious cash flow issues that they cannot pay vendors, pay back loans or pay themselves or their employees. Seasonal fluctuations in sales, problems with late payment from customers and incidents such as a sudden increase in materials cost all impact the flow of cash coming into and leaving a business. When this research was completed, 69 percent of small businesses said they are kept awake at night by concerns about cash flow. Now, the figure is probably much higher, as businesses work to protect their cash flow from the impact of the pandemic.
What do experts recommend?
The reassuring point to remember is that there are ways to optimize your cash flow, even now. Financial experts have suggested small business owners consider some of the following, to help them optimize their cash flow:
- Understand your cash flow with a cash flow analysis. Work out your incoming and outgoing cash for the previous six months. Making adjustments – lowering your baseline – will help you plan realistically for the second half of the year.
- Run a risk assessment on your business. How are your suppliers impacted? How does this affect your ability to generate revenue? What payments do you need to make?
- Control your inventory. Having too much inventory ties up cash. Keep track of inventory so you can estimate your needs better: do you know how much you have? How much is it worth as an asset?
- Chase outstanding payments. Many businesses are operating remotely, and finance departments continue to make payments. While it will likely take you longer to get paid, continuing to invoice your clients could help you generate the cash you need to protect your business a little longer. Stay ahead of collections with an accounts receivable aging report as a guide.
- Find out whether you can delay payments, as long as this won’t result in penalties for you or disrupt relationships with lenders or suppliers. Delaying the output of cash can give you breathing space.
- Consider whether Government Assistance can help you. The Paycheck Protection Program and Health Care Enhancement Act provides an additional $484 billion in economic relief to address financial challenges created by the COVID-19 pandemic as previously addressed by the Coronavirus Aid, Relief, and Economic Security Act or ‘CARES’ Act. The Cares Act provided $377 billion in financial support. Find out more here.
- Find out if your State is offering support. Some states are offering Small Business Resilience Funds. State assistance available depends on the economic impact of the pandemic on each particular state, and the packages agreed by each state.
- Consider whether you’re eligible for private support. Some companies and trade organizations are offering industry relief and business recovery funds for small businesses.
- Ask your customers to support you. They will return ( here are some ways to make sure they do). Until then, stay in touch with them, on social media, by email or with a handwritten, mailed note. Suggest ways they can help you.
- Rethink your lines of credit. Consider if there are different ways you can use existing credit facilities or expand current lines of credit. For example, if you are a meter customer paying for postage using your credit card, it may be preferable to you to preserve this credit for other critical business expenses and speak to the Pitney Bowes Bank about options available to you.
- Look at new sources of capital. Loans, leases, crowdfunding and overdraft facilities all provide access to cash, which could improve your cash flow. You’d need to look closely at whether these are affordable, and which are right for you.
The important thing to remember right now is that help is available to you, from lots of different sources. Connecting with your local Chamber of Commerce is a good place to start.