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No matter what is going on in the economy, when it comes to your business, keeping your books up to date and maintaining a positive cash flow is key to ensuring everything is running smoothly.
Being fully informed and aware of the amount of money coming into and going out of your business will ensure that in the event you have to make any sudden or unforeseen decisions, you have the knowledge to successfully guide your company through turbulent times. Here we provide you with our top tips for managing your cash flow during a crisis.
The concept of cash flow might be a relatively simple one – what comes into your bank account must exceed what goes out. However, this philosophy relies on a careful balancing act of consistent payments from customers versus making timely payments to suppliers, and managing both these effectively to keep the water running at a consistent and steady speed. While your business model might have always been a sound and reliable structure, if the unexpected happens and you suddenly lose a swathe of customers overnight, what should you do?
First, don't panic. If you have managed your cash flow well up until this point, and you've had more coming in then going out, you should have what is called positive cash flow. This positive cash flow, which might ordinarily be used to make new investments and grow your business, is ideal for falling back on during challenging periods. However, you will still need to plan and get organised. As well as managing your own expectations - for example, if you had planned to expand then clearly this isn't the right time - you should also manage the expectations of your customers, staff and suppliers.
This might mean you decide with your team that you will only be operating on a skeleton workforce until more work is available, or agree with your suppliers that you will be suspending their services for a temporary period until things are back on track. If you owe money to suppliers, ask them if they will agree to a suitable and affordable payment plan in the interim. This will help to buy you time until things settle down. Being transparent and honest in all your dealings is key to keeping things amicable and building trust so that you can come out the other side with key relationships intact.
Maintaining your business pipeline is crucial to managing your cash flow. This means having a clear idea of what is likely to be coming into the business over the next three, six and twelve months so you can cut your cloth accordingly. Having an up to date pipeline you regularly refer to will help you not only identify when things are down, but also when they are starting to stabilise. It's important that you stay on top of this so you can keep your staff, suppliers and customers fully informed. For example, if you have put staff on a reduced wage, or had to suspend certain services, then it will help guide you as to when to review, communicate and reinstate.
If you own a business that requires stock supply, then it's crucial you check current stock levels and ensure you amend any orders for items that are now surplus to requirements, particularly for items with a limited shelf life. Likewise, look at how you can make current stock look more attractive to potential customers. For example, you could try offering discounts or free delivery on items you need to shift quickly. Always be prepared to adjust and adapt your plans, including offering products or services you might not have done before. For example, if you own a beauty salon, and have an abundance of skincare products sitting there not being used, think about creating gift baskets you can sell online.
Here at AMR we are experts at helping businesses of all sizes with their bookkeeping and payroll requirements, including cash flow. If you have any questions or need professional bookkeeping advice, our friendly team will be happy to assist you. Get in touch and find out how our specialisations can help you and your business.