Cash Flowing Your Business in the COVID-19 Crisis


Cash Flowing Your Business in the COVID-19 Crisis

With so many businesses feeling the effects of COVID-19, maintaining cash flow has become a real struggle. Not to mention the mental energy required to plan your strategy for when restrictions ease. So, what can you do to ensure you survive this economic shutdown, improve your cash flow, and prepare for the light at the end of the tunnel?

Know Your Numbers

First things first, you need to know your numbers. You can ask your accountant or log in to your accounting software such as Xero or MYOB. The best thing to do is get your previous years sales reports, your gross profit and loss, and compare the same weekly and monthly periods in 2019 to now.

Go through each line by line; these figures will show you how much COVID-19 has affected your business. The comparison will highlight where you are being affected the most. With accurate numbers from your reports, you can predict weekly or monthly sales and cash flow projections for the rest of this financial and calendar year. In the hands of an expert, these figures may show you how your business can rebuild after the restrictions end.

Review Non-essential Operating Costs

Now that you have gone through your overheads line by line, it is time to identify anything that could be reduced or eliminated. What do you really need? Do you need the same amount of stock and warehousing? Do you need to maintain the same number of shifts or stay open for the same number of hours? Do you need that many staff on and can you send anyone home? Reducing hours could save on utility, employee, and supply costs.

Consider Renegotiating Leases & Supplier Terms

By this, we mean focus on your lease and supplier payment terms that could further reduce your overheads. Suppliers should understand that maintaining relationships with their long-term customers will be critical to their own survival. It is in everyone’s interest to see all business return to normal as fast as possible. Suppliers will want to help where able, rather than losing a client altogether.

See if you can negotiate new terms, deferrals on premises and equipment leases, and late payment terms with suppliers. If there is any cash tied up, renegotiating these amounts could free up your available cash to survive and rebuild.

To take the pressure off paying wages and keep your staff on the books ready for recovery, you should have already applied for JobKeeper. If not, now is the time to do so. Some businesses have negotiated with their employees around the use of holiday pay and introducing temporary salary reductions or reductions in hours.

Prepare, Prepare, Prepare

No one knows the exact timeline for moving beyond the COVID-19 shutdown. It is time to really think about your business’s strengths and weaknesses.  There may be opportunities to quickly switch to remote working. You may need to decide if it is time to pivot, expand or limit your business offering. Have you been too reliant on the same customer source? Do you need to upgrade your processes to become an on-demand business? How you handle the crisis might point to your way forward.

The Federal Government has a dedicated page and app to support businesses with employer information. There are links to all the official states and territory information sites.