Running a small business is difficult, but it is even more difficult during these unprecedented times. Since March, the world has been turned upside down as a result of this terrifying virus, In America alone, over 187,000 people have died as a result of COVID-19. The coronavirus pandemic has also forced businesses all over the globe to close in a bid to stop the spread of COVID-19. In the three months of March, April and May, more than 100,000 businesses have closed permanently.
With so much going on, it is more important than ever that small businesses manage their finances properly. Managing your cash flow correctly is one of the most crucial parts of running a successful business.
Here are some of best strategies to manage your cash flow properly:
Ask customers to pay on time
If your business offers customers the option to pay at a later date, it is worth asking them to start paying as soon as they buy a good or service from you. If you are worried about your finances during these difficult times, making sure your customers pay in full and on time can help keep your cash flow managed properly.
If customers are unwilling to pay on time, offer incentives. One way to do this is to offer your clients a small discount on the good or service they are buying if they pay you on time or within ten days of purchase.
Ask for deposits
If you work in a firm that works on large orders (such as big commissions, web design, graphic design, etc.), consider asking your clients for fairly large deposits. Not only does this protect you if the client decides they don’t want the commission and you lose hours of hard work without getting paid, but it also helps your cash flow.
Pay very close attention to detail
One of the most important aspects of running a successful business and managing your cash properly is to understand everything about your finances and reviewing them daily. Keeping an eye on your finances every day will help you notice patterns. For example, you may be noticing that you are spending more money on certain days, or are generating more money depending on the weather. Understanding patterns like these can help you change your business strategies so that you make the most revenue possible
Lower your operating costs
In almost every small business, the biggest cost they will face is operating and overhead costs. In these uncertain times, one of the best cash management strategies is to cut, or at least to delay any operating costs. Here are some ways you can lower your operating costs:
- Make your employees work from home: not only will this protect them as much as possible from the virus, but it will also lower your operating costs.
- Cancel any unnecessary services: you may not be able to provide certain services as a result of the coronavirus. If this is the case, cut any operating costs for this service and instead focus your attention on any services you can operate during this pandemic.
- Switch your utility providers: many businesses could be saving hundreds of dollars by simply switching energy providers.
Making sure your small business manages its cash management strategically can be time consuming, but it is so important, especially during these incredibly difficult times. If you are struggling with your finances, make sure you seek professional help.
George is the CEO of Expat Group Limited, based in Hong Kong.