Getting through a major crisis intact is a challenge many businesses of all sizes are facing right now, and close management of cash flow is more vital than ever.
This is why we’ve put together a list of useful tips and strategies that businesses could use to manage their cash flow to help weather the storm, and hopefully emerge from the national lockdown ready to fight another day.
Work closely with your customers and suppliers
You’re not the only party struggling in these trying times – your suppliers and customers are, too. Understanding where they are in terms of cash flow challenges and figuring out ways of helping each other out is one of the best ways to ensure not just you, but everyone involved in the business ecosystem that surrounds you, makes it.
One thing you can do to help yourself is to speak to your customers to see if there’s any way invoices can be settled faster, and talk to your suppliers to push payments out as far as they’ll allow. You won’t know until you ask, and there may be wiggle-room you weren’t aware of that could give your cash flow a welcome short-term boost.
Dispose of under-used assets
Adjusting fixed costs is a sure-fire way to improve your cash flow in the short term. You may not be using your warehouse space or vehicles to their full potential while the country is in lockdown, or the equipment in your factory could be lying fallow, so it’s wise to look into selling these and leasing what you need in the short term.
You might even find that leasing actually works out cheaper in the long term and stick with it when the lockdown lifts. At the very least it’ll be good for your cash flow in the short term.
Make smart use of online resources
While we’re all social distancing, we’re also glued more to our screens than we’ve ever been. That means there’s a lot more people online to tell about your unique offerings by using social media, targeted advertising campaigns, and other online marketing mechanisms to spread your message.
Facebook is one the most popular social platforms to use to boost your online presence, so consider making posts there and throwing some money behind them to ensure they appear in front of your desired audience.
People could also acquire a taste for not dealing with others face to face while they’re in lockdown, which means a strong online presence and any services you offer that don’t require in-person interaction will continue to benefit your business long after lockdown lifts.
And once you’ve got all these new eyeballs on your online store, encouraging people to visit it more is as simple as making it easier to buy from you by adding as many payment options as possible. Nothing encourages people to come back again and again like a smooth checkout experience that lets them pay using their preferred payment gateway.
There are plenty of South African online payment services you could look into in addition to the more traditional payments methods of EFT, credit card payments, and COD.
Look at your financing options
Businesses need a constant flow of money to function, and when times are tough it’s wise to look into alternative ways to bring that much-needed cash in.
You can do this by taking out a business loan, but just bear in mind that this must be paid back with interest over time. Talk to your bank about it and see what terms work for you.
If you’re struggling with clients that aren’t paying their invoices in time, you could look into “invoice factoring”, which lets you sell unpaid invoices for anything from 70% to 90% of their full value to a factoring company.
You get paid that negotiated value immediately, and when the customer eventually pays the factoring company, you get the balance of the invoice minus a fee. Everybody wins, and your cash flow gets the temporary boost it needs.
We highly recommend speaking to your financial adviser first before pursuing any of these options, of course.
Pivot your business model
This one is definitely easier said than done, but it remains a more desirable alternative to going out of business: adjust your business model to better-suit your circumstances.
Take a close look at your pre-lockdown revenue streams and make adjustments if the national lockdown means you can no longer make money in the same way.
For example, if you were primarily an exporter and your target countries are also locked down, it might be time to look at your local market for opportunities.
A few weeks ago, if you sold mostly gaming notebooks at the time, you could have switched to selling notebooks that are more appropriate for education purposes, as those were recently declared “essential goods”.
Delivery services are a brilliant example of businesses that have rolled with the punches, pivoting from delivering things like hot food and alcohol to delivering goods that have been declared essential, like groceries, medicine, and other items.
It’s not easy to do, but it’s certainly possible to change in ways that will keep the cash coming in for longer.
A place to start
These tips offer some useful ideas for businesses struggling with cash flow right now, and we hope that they come in handy in the coming weeks/months.
We wish you, your families, and your staff continued strength in these trying times.