It is always a challenge for small businesses to maintain healthy cash flow, but it is more of a struggle now that the global economy is starting to feel the effects of the Coronavirus pandemic. Businesses have seen their profits reduced drastically this year, and many people are bracing for recessions in various parts of the world.
Though we are in for some tough times, hope is not lost. You can keep your business afloat during the pandemic if you are careful about how you manage your books. Here are some accounting tips for small businesses who are riding out the storm.
Look for alternative sources of revenue
The pandemic has shown how adaptive humans are, and this is reflected in the ways we have tried to make our businesses cope. For example, some restaurants have started to offer options for takeout and home delivery. Others are even including do-it-yourself options; they are selling their raw stock at a reduced price, to keep the movement in their inventory.
This does not have to be limited to businesses in the food and beverage industries. Partnering with local moving companies will help retail businesses reach their customers even with physical distancing restrictions.
Furthermore, you can look into securing credit lines with your providers. If you have excellent standing, you have a good chance of getting a loan from your bank. Since many lending institutions are dropping their interest rates to historically low levels, take advantage of it, and generate more liquid income for your business.
See how you can cut costs
Put capital spending plans on hold, reduce the number of stocks on your next order, or see if you can return stocks that you have not sold. Bookkeeping should be your priority at the moment and not expansion.
Talk to your vendors and see if you can make arrangements that accommodate both of your needs at the time. In all likelihood, they are also economically affected by the pandemic, and would rather have some money rather than none.
Shift production to other markets
If you’re running a business even slightly aligned with people’s needs today, you can temporarily shift your operations to producing essential supplies. For example, a clothing company can produce protective equipment for both medical workers and people who must leave their homes. Fragrance companies can make medical-grade alcohol. Look at ways you can convert production and go for these.
Take care of your employees
Treat layoffs as the last resort. For your company to be productive, you need manpower. If you start letting people go, this will reduce your capacity for work. Furthermore, the people left behind will probably grow anxious and demoralized from seeing their fellow employees leave. Talk to your employees about making adjustments while there are severe restrictions.
Your employees might be amenable to working for fewer hours, or for reduced pay, so you can keep the business open during this time. You can also turn to loyal customers; perhaps they could come up with a system for tipping the staff or taking care of their immediate concerns like medicines, baby formula, or groceries.
Look outward for help
See if there are competitors whose inventory is up for sale. If similar businesses are closing up shop in your area, you can buy their products to add to your stocks. You can also start seeking out clients from whom you have accounts receivable; they’ll surely understand why you’re giving them reminders about their bills!
Another avenue is through government aid and relief. See if your business qualifies for low-interest-rate loans, or if your state or county has special concessions for businesses owned and operated by locals.
Getting through tough economic times is manageable if you explore all your options. You can stay afloat during the pandemic if you have a good gameplan; an accountant can help you identify what you should prioritize and what you must forego at this time.
Partner with us at A4E for top-quality accounting services in Boston. Our bookkeeping, taxes, and CFO services will take the stress off your shoulders!