As we continue to wait for pandemic curves to flatten, businesses all over the world are feeling the pressure of forced shutdowns. Many are scrambling to reassess finances and keep operations running for an indefinite period of time. As uncertainties become unprecedented, here are a few key areas to shift your focus to in order to help your business survive.
1. Redirect Your Focus
If your focus has been on how to increase sales and revenues or improve efficiencies and profitability, now is the time to work with an accounting service to zero in on your balance sheet. Keep an eye on your working capital and start forecasting your cash flow with an accountant. This can help keep your finances predictable for the next 30 to 60 days.
2. Work on Receivables and Payables Management
To avoid any unforeseen financial disasters, tighten up on your receivables. Start working on halted collections and offer discounts for early payments and even long-overdue payments. Stretch out AP payments for as long as possible without damaging your relationship with key suppliers. Review your customer credit risk to prepare for the impact of the pandemic over the long run. Identify those who may be at risk and begin limiting their credit.
3. Take Note of Your Inventory
An inevitable drop in demand will result in inventory levels that may be too high for your business to manage. If such is the case, you’re going to want to reassess your safety stock levels and lower ones you can afford to lose without hindering customer demand. Consider low or negative margin sales and how you might be able to convert excess inventory into cash.
4. Negotiate Your Supply Line
It’s likely that your suppliers are sitting on excess inventory just like you are. Use this as an opportunity to negotiate lower prices in order to increase your leverage.
5. Reduce Discretionary Costs
While most of your focus will remain on your balance sheet, it may also be time to cut costs. Immediate cash flow opportunities might include reducing your 401k Plan to zero or whether you can pay the match at the end of the year instead of during your pay periods. You can consider leasing larger purchases that you can’t defer rather than buying altogether. Try to obtain COVID-19 tax credits and cash flow savings related to deferrals to obtain payroll savings.
6. Assess Your Financing
If you haven’t yet teamed up with any bookkeeping services, you probably should. You’ll want to consider drawing down on your line of credit while it remains available and assess how significant your cash flow situation is. You might have to look at recapitalization opportunities such as taking advantage of SBA lending or economic injury disaster loans.
7. Prepare for the Rebound
Though today holds significant uncertainty, major financial institutions predict a large bounce back in GDP by the third quarter of 2020. Remember that while it may be your business’ main goal to survive, it is also to take part in the eventual upswing. This means remembering to prioritize your supplier and customer relationships and, most importantly, your employees.
Trying to keep your business from going underwater may seem nearly impossible in the middle of a pandemic. But with the right business growth services, such as ours at A4E, we can take the stress of bookkeeping and other finances off your shoulders and into our own hands.
If you’re looking for effective business growth services in Boston, MA, we’ll be sure to take note of your pain points and provide you with exactly what you need.