Since I had shared in my previous two stories about me getting a job and my thoughts about it, I should also share the things that come with it. My job needs me to shift to a new metropolitan city…
What a start to our Vision 2020 year! Over the past few months, most of the world have gone from blasé to a siege mentality about the new Coronavirus which has caused great disruptions in economies world-wide. With stock market roller coasters, restrictions in place and disruptions on trade every small business is bound to be affected. Recent surveys show that 80% of small businesses in South Africa are negatively affected as a direct result of the Coronavirus and that some, if not all of their income streams are in jeopardy.
So, the question is asked — What can you do to ensure that your business survives the current chaos and is thriving beyond? Not sure? Here are some actions you can consider:
Prepare and make use of cash flow projection
I believe that a very critical part of getting your business to survive is ensuring you have a pulse on the finances and admin of the business at all times! Having a close eye on your cash flow and projections and also reducing expenses could be the secret key here to getting your business through!
A cash flow forecast can be a business saving tool during the uncertain times we are heading into as it helps you see well in advance when you may have a cash shortage that could spell disaster for your business. It can also give you enough time to take action to avert a crisis, enabling you to access better loan rates or tighten up payment terms to bridge the gap. As the saying goes, forewarned is forearmed.
In more desperate or difficult times we should be considering crisis cash flow management.
The key with crisis cash flow management is to try and work out what the income and expenses are per week — based on when you are expecting the money to come in and when you need to pay it out. This should be updated daily as it really is not a forecast, but more a living working document.
If the bottom line shows a negative, after taking bank balances and overdrafts available into account — it would mean that you will not have enough cash in the bank to pay expenses for that week — and if you don’t do something, you could get into trouble. Being able to identify this will allow you to make adjustments in advance instead of when it is too late as mentioned earlier. Adjustments could also include renegotiating a payment term with a creditor to delay a payment to a particular week in which you have projected a more favorable net cash balance, or many other options that are available — the important thing here is that having some sort of cash flow projection and measuring tool in place gives you more power over the cash flow of the business.
Saving costs by reducing expenses is a great way to keep some of your money in the bank. This allows for more saving and also identifies overspending and wastage.
Some tips for reducing expenses:
Analyse all business operating expenses to determine which ones are too high based on industry benchmarks. Any amount saved by scrutinizing your operating costs will transfer directly to more profit, and more money in the bank! A good expense to start with here is Insurance, Subscriptions — some may not even be required any more.
Review and analyse your Suppliers to determine if you can negotiate a better deal on your materials purchased
Reduce bad debts by implementing an effective debt collection system to ensure that you have no losses. Bad debts eat directly into your hard-earned profits!
Look at finance restructuring to help save interest on your business loans.
Review the margin levels on all your products and services and determine which ones need to be dropped because they are contributing poorly to your bottom line — Think of every product or service that your company sells as if it were a separate business.
Determine which customers are most valuable by analyzing your complete customer database and working out the profitability for each customer by how much margin they contribute to your business. Sometimes the smallest and simplest customers provide you with the least headaches and the most margin and profit, yet they are overlooked
Consider alternative income streams
Having an additional or alternative revenue stream in place allows for less risk for your business and more income.
Consider taking stock of your resources available and what you can do to generate other revenue using these. Whether it is consulting your clients or selling your knowledge — opportunities await.
With plenty of people already working remotely, there are a lot of free tools business owners can utilize so that teams can stay in touch and keep working even if they aren’t in the same place.
Implement a remote work policy that covers when you expect your team to be online or available, how to communicate (via email, Teams, or video call, for instance), and what deliverables each team member is responsible for completing.
There is only one way to address cash flow crunches, and it’s planning so you can prevent them in advance.
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