• Divya Dhomne

Surviving Cash Flow During a Crisis

Updated: Aug 5, 2020

During these times of crisis, everyone is facing a cash crunch. All businesses and households have been affected due to the deadly coronavirus pandemic. With the majority of the countries in the world forced into lockdown, the businesses, the economy, the households everything is suffering.

If you don't have a proper strategy to address this cash flow crisis, it could lead to the potential downfall of your business. That's why you always need to be prepared for such events.

Cash Flow Management

Cash flow management is the process of tracking the movement of funds in and out of your business. It helps you calculate how much money will be available in the future for your business. It also helps you calculate how much money your business needs to cover debts, salaries, payments, etc.

A cash flow shortage occurs when more money is flowing out of your business than into the business. During a cash flow shortage, your business might not have enough money to cover operating expenses like salaries, payments, etc. To get through a cash flow you need to have a strategy to handle the shortage of funds.

Revise your Business Plan

During a cash flow crisis, you need to reevaluate your business plan and analyse what might have caused the crisis. It may be a one time fault or it may be a recurring problem. If you analyse and overcome this problem in the beginning it will help you avoid all the future crises. Also when you analyse your business plan you can look at your profits and losses and you can plan the future ventures so that they benefit you.

Advance Payments

If you are stuck in a cash crunch, you can ask for your clients to give you advance payments to cover your dues. You can offer them discounts or special offers for early payments to encourage them for early payments. You can ask for the full or partial payments based on your needs.

Delay your Expenses

You can get your payments early, but to keep the funds in your account you will need to delay your expenses to some extent as well. Try to pay your bills and debts a little later than usual. Don't delay it way too much either as that may hurt your relationship with vendors. Find a mid-point in between so that you can have money in your account while still not exceeding your deadlines.

Reduce Outflow of Cash

You can try to eliminate expenses that aren't necessary or important to the business. When you reduce the cash going out of your business, it will automatically translate into having more funds in your account. You must prioritise your expenses. Once again analyse your business plans and mark all the necessary expenses. Only spend on what is essential to keep your business running and things that generate revenue.

Ask for Discount

Try to ask your vendors for a discount. Call your biggest or most frequented vendors and negotiate on the prices. You can offer them some benefits in exchange for a discounted price of goods. You can increase your shipment size or extend your contract with them in exchange for discounts or special offers.

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