Managing Your Cash Flow during 2021’s Continuing Crisis

COVID-19 has taught us that a single event can trigger a cascade of risks affecting all aspects of your operations. Revenues that were once predictable, are no longer stable. As you try to navigate the current crisis, you face previously unseen costs. COVID-19 and other 2020 events have affected almost all aspects of your business, making it challenging to pinpoint all potential variables that might simultaneously affect cash inflows and outflows.

In this environment, you should consider taking several steps to obtain better, more comprehensive methods for managing your cash flows.

Sources of Cash (Inflows)

Have you determined which processes are critical to continuing operations during this crisis and which you need to suspend temporarily? You are now scrambling to figure out what to pay and what can wait. By using strategic cash forecasting to minimize surprises, you will gain a competitive advantage.

A cash model focused on short term cash management (6 months) will give clear guidance on:

  • Focusing on your receivables.
  • Offer your customers small discounts as an incentive to pay their bills early.
  • Automate invoices to be sent electronically on delivery of products or completion of deliverables the same day with terms of “10 days or two weeks,” depending on your relationships with your customers.
  • Review your contracts to ensure that they are air-tight to eliminate and prevent litigious customers from taking you to court.
  • Monitor your receivables closely. Automate a friendly follow-up notice five business days after invoicing as your reminder when your invoice is due.
    Consider discontinuing extending credit to your customers who regularly pay you late.

 

Dissect You Cash Outflows (Expenses)

  • Updating your payables strategy.
  • Request electronic billing from all vendors. Online billings avoid late payments. Import electronic invoices into your accounting software, manage expenses and adjust dates as needed based on your bank balance.
  • Follow a routine of reviewing your accounts payable aging on Monday to know the current week’s cash requirements, and see what is critical for the upcoming three months. Check your bank balance to determine if what is due is what you can pay, adjust as necessary. Contact your vendors so they are informed as to when you would be making payments.
  • Prioritize your payments to vendors based on your operating demands.
  • Look for an early payment discounts. Also, flag vendors in your accounting software who charge interest or late fees to avoid paying any additional amount due to lateness.
  • Your positive relationships with your vendors are critical. Establishing trust goes a long way to maneuver successfully to make deals with your vendors and help you manage your cash flow.

Decision-making based on scenario and strategic forecasting.

  • Creating multiple scenarios for forecasting.
  • Each scenario should contain enough detail to assess the likelihood of success or failure based on various strategic options. The very process of thinking about your possible business futures will be a valuable opportunity to address issues that might be overlooked.
  • Will there be sufficient demand for your products/services? Are supply chains likely to remain intact? How much competition can you anticipate? What changes have occurred in your industry since Covid-19?
  • Establish a narrative. → Define implications and early indications. → Determine mitigating tasks to minimize potential effects.
    Your scenarios require strategies —forecast sales and expenses for each method.
  • Choose which scenarios will be the basis for decision-making. Update with monthly actuals so they remain current and help you navigate the current economic uncertainties.
  • Maintaining positive cash flow
  • Reduce your costs as much as possible. Can you find an alternate, less expensive way to produce your products? Or streamlining your client deliverable process to increase cash inflows? Have you cut everything your can for the short-term?
  • What government sources are available to support your business continuation? Have you applied?
  • Prioritize generating cash over profit. Find easy, low-cost, low-effort ways to get more money in the door right away.
  • Offer exclusive discounts to existing customers.
  • Repackage your product or service for a consumer market to sell directly to consumers.
  • Consider lowering your margins to gain more customers.
  • Empowering your team.
  • Be transparent about your business financial status and what you need to achieve with their support.
  • Make sure that all your employees understand how their role will aid your strategy and their fellow employees.
  • Through your team’s education and empowerment, you will unleash their creativity and motivation to address your business’s challenges.

 

Conclusion

So, as you improve cash flow with these tips, research how businesses in your industry responded to the current situation but how verticals made their way back to sustainability. You can even get your entire team involved: In a shared place, document what you find, both what worked and what did not work. Review your findings together and discuss how they support your potential path forward. Your solution to your cash flow struggles is your diligence, consistency, and transparency.

Plan! Adapt! Manage! Succeed!
AccuComp Enterprises has a track record of supporting and nurturing growth, in addition to keeping an eye on cash flow – the lifeblood of business.

Contact us at m.parces@accucompenterprises.com.

We are all in this together!

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