The COVID-19 pandemic has made things complicated for companies around the world. A lot of organizations have switched to remote work as one measure. However, some companies don’t have this option and have to find other ways to protect their business.
It’s difficult for all industries, but it doesn’t mean that your business can’t protect its cash flow. In fact, now it’s more important than ever to manage and monitor your cash flow to stay afloat. Many organizations don’t know how to do this properly, even in “regular” conditions and let alone now.
However, it’s important to understand your opportunities to protect your organization and strive when things get back to normal. Here’s what you can do.
1. Identify potential risks and prepare
All businesses are exposed to certain risks. It’s impossible to predict all upcoming events, especially in this climate. Trends, consumer behavior, and market factors change, and you can never be 100% prepared. However, you need to do your homework to identify and prepare for potential risks.
Companies might need to give some of their employees a temporary leave of absence. At the same time, you need to consider data and technology risks if you’re currently working remotely. After analyzing all the risks, consider writing a risk register.
See what the consequences of each risk might be and create strategies to mitigate those risks as best as possible. Some of the key metrics you should track include:
- Liquidity risk;
- VaR (Value at Risk);
- CFaR (Cash Flow at Risk).
2. Find government help
All governments across the globe offer different help packages to businesses during the pandemic. It’s important to learn what kind of help your organization qualifies for and get the most out of it. For example, the US Small Business Administration offers all kinds of COVID-19 relief options.
There are all kinds of programs that protect your employees’ paychecks; some give advances on disaster loans that companies don’t have to pay back, and so on. Most governments provide tax relief help to help you deal with financial pressures and lower profits.
Governments want businesses to continue to operate and stay afloat. After all, if companies go under, they won’t pay taxes at all, which means that countries will have low tax revenue.
3. Set priorities
Even when companies close their doors and start working remotely, there are still a lot of expenses that they need to cover. Organizations need to pay for legal advice, utilities, rent, accounting, pay suppliers, salaries, and various other services.
You can postpone some expenses, but some are simply essential. That’s why it’s crucial to prioritize. Look at the core assets your expenses cover and focus on them first. For example, if you’re selling products online, you need to ensure that suppliers are delivering your shipments.
After all, that’s what brings in the money. On the other hand, you can postpone expenses that aren’t crucial to your business including employee perks, etc.
4. Run your business via trust
Running a business via trust helps protect your assets and finances against different risks. The main reason for this is that there’s a limited liability when using a trust. Trust funds also have better regulatory requirements and lower taxes.
In other words, you will have to deal with fewer government regulations while getting more time to focus on running your business. In other words, you will get more liquid cash in your business. All the income is distributed to beneficiaries with autonomy to reduce the tax they have to pay.
5. Take care of your accounts receivable
In case your business model lets customers get products or services without paying instantly, you will have to manage accounts receivable to ensure healthy cash flow. That’s the time when you can’t miss any upcoming payments, and you must let your customers know they need to pay on time.
Stay on top of all your payment processing, invoicing, billing and subscriptions, credit policies, internal communication, and client communication. Consider setting up automation to avoid missing anything and start processes at desired moments.
Set up clear policies and make sure they are executed flawlessly. Be proactive and contact clients to remind them of their payment obligations especially if they are overdue.
These are just some of the things you can do to improve your cash flow and protect your business. Take the time to analyze your processes thoroughly and recognize the right strategies. However, while you do all of this, think about improving marketing, product development, and customer service.
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