Nowadays, in the context of Covid-19, small businesses find themselves in
great difficulty to ensure smooth operations. Some are even facing bankruptcy
because of decreased activities that significantly impact their cash flow.
Regardless of the current economic situation, small businesses and startups
generally have trouble managing their cash. Prior to Covid-19, over 70% of
businesses that went under, did so because of poor cash flow management.
When facing an economic downturn, cash flow problems multiply and become
even more challenging.
Navigating a crisis requires a high level of patience, supervision and expertise
in order to overcome all the negative financial impacts. In fact, most small
businesses are facing serious trouble and should seek the expertise of an
experienced CPA or business advisor who will help develop a new business
Among the actions required to prevent the financial impact of the crisis on the
company, it is suggested to immediately develop a cash flow plan with a vision
of continuity and maintaining customer engagement during the crisis. After a
period reduction in economic activity, it's time to think of other
manners to reach customers and give more energy to cash flow.
Currently, certain types of products are more in demand on the market compared
to others, in fact certain industries can adapt to the present situation through the
diversification of their products depending on market demand. Also with the social distancing guidelines, it may be that the methods of delivery of products requires adaptation in order to ensure business continuity.
With the lock-down measures, customers are now more present online than
before. This represents an opportunity to approach them through the various
possible technological tools and will allow companies to keep better communication
with their clients. For example, informing customers about opening hours, location, products, services and what your company is doing to limit the spread of COVID-19. It's time for companies that are not yet doing e-commerce to invest in new technologies. The establishment of a website where you can sell your products or services online will allow you to reach your target and continue your commercial activity by turning a challenge into an opportunity.
On the other hand, it is strongly suggested to suspend a certain number of
unnecessary operating expenses in the short term. A detailed review of your
expenses is essential and this will allow you to increase your bottom line results.
After all these measures are in place, it's time to analyze your cash flow
forecast. This will allow you to anticipate your cash flow and provide you with
information to support a working capital loan application if it turns out that your business
Poor cash flow management was the number one cause for business failure prior
to Covid-19. Do not wait to ask for expert help, as postponing a change in
business plan or strategy can be devastating once the economy reopens.
ReInvestWealth's team of CPAs is here to help you model your cash flow,
examine the different scenarios of your business and answer any questions by
providing a free consultation. Simply send us an email or schedule a conference
call and we will get in touch with you.