All business owners are currently in unchartered territory due to the ongoing effects of the coronavirus crisis. It has made businesses in every industry acutely aware of the importance of reviewing their cash flow, with many dealing with dramatically reduced incomes along with the pressures of covering expected overheads.
Quick cash injections may provide the answer to dealing with short-term personal finance issues, but what options are available to businesses in this current environment? Here are 5 ways to deal with a cash flow crisis with your company.
Keep on-top of the situation
The task of chasing payments isn’t one many businesses take on with relish, as it requires time and a patient approach. However, there is no avoiding the fact it has to be done and it takes on increased importance in-light of the current situation. Keep on-top of outstanding payments, and as long as your payment terms are laid out clearly in your contracts, the companies you are chasing will be aware their debts have to be addressed.
Communicate with creditors
The same attitude you apply to your debtors must also be used with your creditors. Wherever possible, any outstanding payments owed by your business should be addressed and negotiated. Creditors could be more understanding of your situation if you are open to discussing the circumstances. Propose a repayment plan that offers guarantees they will still receive their money without compromising the viability of your business in the short-term.
Apply for government-funded credit
Shortly after the coronavirus was declared a pandemic, the UK government announced two schemes to help business: the Coronavirus Business Interruption Loan Scheme to help companies stay afloat, and the Coronavirus Large Business Interruption Loan Scheme for firms with an annual turnover between £45 million and £500 million. It is unclear at this stage how quickly any successful loan amount will be received by applicants, but if you are eligible it is advisable to make an application.
Use the government job retention scheme
The Coronavirus Job Retention Scheme has been made available by the government and will pay 80% of furloughed employees’ wages (up to £2,500 per employee each month). The scheme also offers cover for employer National Insurance contributions and minimum pension contributions. This will allow business owners to reduce fixed costs within their organisations, without having to lay off staff. If you need to address rent issues for your business premises, the government is also providing protection from eviction, helping you to manage another major cost to your company in the process.
Offer incentives for faster payment
Many of your customers are likely to find themselves in a similar situation of having to find creative ways to manage their cash flow. As a result, they may be initially reluctant to settle outstanding debts. One way of encouraging them to pay is through incentivising them do so early, by offering a percentage discount if the invoice is paid by a certain date. Not only does it ensure you receive a much needed cash boost, but it demonstrates to the customer and understanding of their situation and offers reassurance you are a brand they can trust and return to in the future.