Positive cash flow is essential for the survival of any business, which is why it’s essential to ensure there is a constant stream coming in. It’s a challenge for businesses under the best of circumstances, let alone under the effects of a global pandemic. March this year saw the forced closure of thousands of companies across Australia as we went into lockdown to curb the spread of COVID-19. Those able to remain open are suffering under the threat of a recession. The unemployment rate rose to 7.4% in June, which had a flow-on effect through all businesses and their cash flow.
In light of this, how does your business work to improve their cash flow and survive? Here are 12 practical ways to help get your operations back on track.
Increasing Your Monthly Cashflow
Let’s start by looking at the quick gains you can make to see that cashback in your account as soon as possible. Remember, everyone has been affected by the COVID-19 pandemic, so it is important to be considerate of customers and other businesses in this time while trying to keep your own company afloat. This may mean readjusting agreement and terms from both ends to ensure everyone is in a fit position to meet them.
1: Send Out Invoices Immediately
This is a simple yet effective way of increasing your cash flow. If you stay on top of your invoices and get them sent out on time, there will be fewer delays with payments. Of course, sending an invoice doesn’t automatically mean you will be paid, so it is crucial to set clear expectations of when the money is due to make follow up easier.
2: Send Invoice Reminders
Sending out the invoices is just one part of the equation. You also need to make sure you follow up when they’re past their due date. Software can make tracking this process even easier with automatic reminders sent out. Once the invoice is late, it is worth picking up the phone to check the customer received the invoice in the first place and to give them a gentle nudge.
3: Turn To Invoice Factoring
This takes things a step further with businesses selling unpaid invoices to a financing company for an immediate percentage of the value. The factoring company then collects on the invoice and takes a set percentage fee for their services. This results in immediate cash flow; however, it does cost you in the process.
Increasing Your Operating Cash Flow
Next, let’s take a look at how your business is operating and anyways you can change things up to increase your cash flow.
4: Update Payroll Processes
Take a look at your payroll processes. It is more effective to switch from bi-weekly to bi-monthly payments. With the former, two months a year it will result in three paychecks going out, which can leave a business out of pocket for that month.
5: Take An Inventory Check
Take a look at your products and or services and how they are selling in the current climate. With a global pandemic underway, things are shifting, and you don’t want to be holding onto products that are no longer selling. Instead, look at what is currently selling and readjust your stock in line with that. Any extra stock you can sell off cheaply to reduce stock levels. People will love a bargain under the current financial strain, and you will get a boost in cash flow.
6: Delay Vendor Payments
On the flip side of trying to get your invoices paid immediately, delay any invoices you need to pay while staying within the payment terms. This will help slow the outflow of cash and help you manage things more effectively.
Using Sales and Marketing to Improve Your Cash Flow
While you may have pulled strings tight on the marketing budget under the current climate, it is important to review it, rather than stop altogether. More than ever, your business’ ability to pivot and stand out in the ever-changing market is what will ensure ongoing success, and your sales and marketing efforts can be tweaked to gain new customers and bring in the cash upfront.
7: Offer Subscription Sales for Routine Purchases
If your customers are purchasing a specific product or service on a cyclical basis, consider offering them a subscription service, which involves paying more upfront but saving in the long run. This sees the cash in the business straight away.
8: Revaluate Your Marketing
Rather than pulling your marketing efforts altogether, it’s a great chance to review them in the current climate. Pause to think about how your business fits in with the global pandemic and what you can offer during this time. By pivoting your business to suit current needs, you can market yourself effectively and see the return straight away.
9: Leverage Your Happy Customers
This is often the best way to earn a quick win. Send out a discount code or offer to your past customers to encourage a repeat purchase. They have already tried your product and will likely happily take up the offer of a discount. You can take this a step further with a referral program, to bring new customers your way in the process.
Improving Cash Flow During COVID-19
When times are tight, we tend to look towards what we can cut, rather than ways we can improve. Here are some ideas to help you think about your business differently and the different options that are available to you.
10: Be Flexible With New Sources of Revenue
Now is a great time to look for new sources of revenue for your business. With more people working from home, do you have office space you can rent out? Are there add ons you can offer with your current products or services that will be well valued in this time? Get creative and see where you can add value.
11: Take on Debt
Don’t be afraid to take on debt to keep your business afloat. With interest rates low at the moment, it makes sense to take out debt to keep you running until operations can return to normal. Of course, we don’t know when this might be, so it is worth pivoting your business at the same time to meet the current climate.
12: Be Objective About Unnecessary Expenses
Before even looking at cutting salaries or laying off employees, see where else in your business you can save. Cut down on the software you use, give up your business premises and have people work remotely if possible, and put a halt on any perks such as coffee, lunches and more for the time being.
While it can be scary facing a global pandemic and making it through with your business intact, it can strengthen your business and demonstrate how capable you are of changing with the times. The more important thing is to reassess everything before moving forward. Look at where you can gain some quick cash flow wins, before looking to the bigger picture of how you can move your product offering through this pandemic and offer customers what they need. The ability to pivot with the times will see your cash flow remain steady to help you through.