Little remains to be said about how the pandemic has permanently altered the shape of the planet and pushed millions of lives to the abyss of darkness. Tens of thousands of industries have gone out of business, and most of them have no hopes of bouncing back. The virus has claimed not only millions of lives but also crippled the global economy. Supply chains have collapsed and put business owners, suppliers and vendors in a precarious situation. In the circumstances as such, if you do not actively try to manage your cash flow, your business could end up in a vicious loop of debt and legal complications.
You could get caught up in the state of negative cash flow, and that shall leave your business in tatters, especially during such grueling times. Negative cash flow indicates that you are spending more than you earn, and this is quite a common phenomenon. Studies have shown that about 82 per cent of businesses shut down due to a negative cash flow even when the economy is at its peak. That is why it is important to find the right cash management solutions, especially when you have a pandemic wreaking havoc, to navigate the distressing times as easily as possible.
In the article that we have today, we shall discuss a few ways to find the right cash management solution for your business so that you can navigate the crisis effectively and walk towards financial recovery in the post-pandemic world. There are three principles that you might want to follow, especially when you have to wade through such critical times and manage your cash flow. Let us now look at each of these three principles and see how they can help manage the cash flow of businesses amidst a pandemic of such a scale.
Start by Reducing Your Costs:
As a business owner, you shall have many areas where you will need to invest your money. However, emergencies require you to rethink your finances and analyze how you could cut down expenses. Therefore, the first thing that you must do is reduce your costs as much as possible, if you are to stay put amidst the pandemic. Keep reviewing your finances and expenditure and see where you can cut down.
Once you sit and chalk the expenses out and analyze the areas where you are spending money, you shall realize that there are many expenses that you can easily avoid with a bit of forecasting and the help of effective cash management services. Make a list of your variable and fixed costs and do a bit of research on all the options of alternate financing. This shall help you explore your options and arrange for funds even when you have a global financial emergency or a crisis of any sort.
Try Generating More Cash Over Making a Profit:
One rookie mistake that most business owners make is confusing profits with positive cash flow. You must always remember that profit does not mean you have a positive cash flow, and the most important thing that you need right now is a positive cash flow. Therefore, your priority must be to generate more cash and not focus solely on making a profit. Remember that once you start generating positive cash flow, you will automatically be able to concentrate on making a profit.
It might be quite a significant mental shift to focus only on generating cash where you have always paid more attention to earning profits. However, you must understand that these are challenging times and your business goals need to evolve with the changing times. Therefore, now is the time to readjust your business goals and see to it that you have a proper financial plan in place that helps you open up avenues that increase the amount of cash flowing into your business.
Be Transparent with Your Team:
It is vital that you are transparent with your team if you are to manage your cash flow efficiently. This might not strike you as an important aspect. However, if you are not opening up to your team and being transparent with them, you might end up keeping them in the dark about your business’s situation. As a business owner, you must take responsibility for your team and the situation you are in and inform your employees about the same.
This will help your employees to understand what they need to achieve and collectively work towards. Under extraordinary times, working together can help employees and employers enjoy a shared sense of mission and work towards a common goal with much enthusiasm and gusto. This shall also help your team to understand the financial needs of your business and, therefore, improve the cash flow.
Managing your business’s cash flow efficiently is one of the most important aspects of running a business. The success of your business boils down to how well you manage your finances and how you can maintain a positive cash flow. The aforementioned points are some efficacious cash management solutions that you can consider. However, make sure that you have done enough research to deploy the measures that suit your business well during the pandemic.