5 Steps to Solve Small Business Cash Flow Problems During Reopening4 min read

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Executive Summary

Small businesses face continued challenges during reopening after COVID-19 shutdowns. Focusing on cash flow can help small businesses stay financially healthy and prepare for more robust growth as the pace of economic activity increases.

After months of economic paralysis, states throughout the U.S. are moving through phases of reopening. With so many small businesses barely managing to stay afloat during shutdowns and stay-at-home orders, an increase in customer activity is an extremely welcome development. 

At the same time, risks remain for small businesses in almost all sectors. Many people are hesitant about resuming normal activities, employee safety must be maintained, and local coronavirus outbreaks could cause new rounds of quarantines and restrictions.  

In this uncertain climate, it’s essential to optimize cash flow. For small businesses, focusing on cash flow provides a clearer picture of their financial health and allows them to be more nimble during challenging circumstances. After a rocky start to 2020, these five steps can help small businesses solve cash flow problems and emerge stronger during reopening. 

Step 1: Reevaluate Your Business Operations

The economic environment has changed dramatically because of COVID-19, and your business may need to change with it.  

  • Understand your local situation: What is your state’s reopening plan and what is the schedule for each phase? How do you envision your business operating under each phase and its set of restrictions? 
  • Provide for employee safety: Take steps to keep employees safe from virus exposure and make sure your sick leave policy is clear. Protecting employees is not only the right thing to do, but it can avoid unexpected staffing interruptions.  
  • Consider your hours and staffing needs: Think realistically about your optimal operating hours and how many staff you need throughout the day. 
  • Review supplier status: Classify your suppliers based on how essential they are to your operations and then confirm details about availability, shipping, and pricing. 

Step 2: Review Your Finances

During tough economic times, getting a handle on your finances is one of the most powerful tools at your disposal. In this process, it may be tempting to look primarily at revenue or profits, but a broader focus on cash flow can better position your small business for success

Operating expenses are a key determinant of cash flow, so carefully review your budget. Look to cut overhead and reduce both one-off and monthly spending in light of changes to operations. 

With a thoughtful budget, you can craft multiple cash flow forecasts. Consider the best case, worst case, and intermediate scenarios so that you can avoid cash flow problems before they arise no matter how reopening unfolds. 

Reflecting on finances may also reveal steps to improve your business credit score. Even if you aren’t planning to apply for a loan or line of credit, better credit can facilitate more favorable terms with vendors. 

Step 3: Adapt to Meet Customer Needs

Despite reopening, many customers are hesitant to go back to normal. Through dedication to keeping them safe, you can help build your customer base and bolster both your revenue and cash flow in the process. 

Implementing CDC guidelines and sector-specific insights can give customers peace of mind. Invite suggestions from customers and apply any realistic measures that support their well-being. 

Reduce close contact and high-touch surfaces by offering QR codes, reservations and appointments, and touchless payments like Apple Pay, Samsung Pay, or Google Pay. Consider options for reduced-cost delivery, contactless pickup, or moving services online if customers remain reticent about in-person activities.  

Keep people informed of changes by putting up easy-to-read and abundant signage. Instruct staff to patiently explain new policies to customers and guide them through the process. 

It’s also a good time to harness your company website and social media accounts to keep customers in the loop about safety measures, updated hours, and sales. Even during social distancing, you can focus on building your brand and connecting with customers through Facebook, Instagram, Twitter, and other media.  

Step 4: Check-In With Your Landlord, Vendors, Lenders, and Suppliers

Lowering expenditures improves cash flow, and that makes it worthwhile to contact your landlord, vendors, lenders, and suppliers. Especially if you have established relationships, you may be granted more beneficial terms that can provide a boost to your cash flow. 

Examples of ways that you can get relief from these partners include discounts, extended billing cycles, or even a short-term grace period on payments. You may be able to negotiate payments calculated as a percentage of revenue that tracks with the phased process of reopening. 

The economic hardship from coronavirus shutdowns is no secret, so many landlords and suppliers may be willing to work with you to find a win-win solution. 

Step 5: Explore Financial Assistance Programs

Even if you implement these steps, the gravity of the current situation means you may still confront challenges in keeping your cash flow healthy. Financial assistance programs to help small businesses can help overcome those challenges. 

Business-assistance programs have already been created at the local, state, and federal level and are offered by the government, for-profit entities, and non-profit organizations. Our COVID-19 Funding Relief Tracker keeps you up-to-date on these programs and lets you sort by state and/or the source of assistance. 

Taking concrete steps to improve your cash flow allows your small business to put financial assistance to better use and strengthen your overall position as both the country and economy are gradually reopening. 

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