The small business community has been hit particularly hard by the conditions surrounding the coronavirus. If you're like many others, maximizing cash flow is more important than ever. Here are a few tips to help you manage expenses and cut costs.
1. Outline your topline expenses
Take a careful look at all your business expenses to understand exactly where your money is going to the penny. Categorize daily, weekly and monthly expenses and rank each based on business necessity. Work from the bottom of your rankings upward to create a plan for eliminating nonessential expenses. For those you keep, consider less expensive alternatives.
2. Cut unnecessary expenses immediately
If you have subscriptions to business or industry magazines, cancel or suspend them for now. Take a look at memberships to associations and professional organizations. Also consider cutting back on company gym memberships and entertainment services like cable or streaming TV. If you have companies that deliver water or care for plants in the office, consider cutting those services or taking a do-it-yourself approach.
3. Rent may be an opportunity to save
Typically, rent is a fixed expense—but these times are anything but typical. Get in touch with your management company to see if you can negotiate a break for a month or two to help you through a transitional period. Continuing to have you as a long-term customer versus losing your rent is a smart business investment for them. Also, talk with your bank about bill deferment opportunities.
4. Collect payments as soon as possible
Once you’ve delivered your product or service, invoice your customer immediately and note on the invoice that “payment is due upon invoice receipt,” whenever possible. You should also have a process in place to deal with late or delinquent payments—you may choose to charge a fee for late payments. Be sure to follow up on all outstanding balances or ask a trusted and reliable employee to do so.
5. Delay payables when possible
Paying your own bills while slowing the outflow of cash is an important balancing act. It’s important to pay your bills on time, but paying vendors early may hurt your cash flow. Make sure you comply with the terms of your contracts to avoid any late payment penalties. Slowing the outflow of cash is important, but so is maintaining a good credit rating and positive relationships with your vendors and suppliers.
6. Consider discounts and rewards for your clients, customers or members
Managing cash flow also means making sure money keeps coming in. And right now, providing relief to your current customers shows that you understand the extraordinary times we’re experiencing. Helping them out, when you can, will go a long way toward building more valuable relationships in the long term. If you have a rewards program of any kind, offer double or triple the points to encourage their next purchases.
7. Use technology for efficiency
Consider moving to an online service to streamline your invoicing and accounts receivable. Track and manage your money using online banking, or look into using accounting software to get a 360-degree view of your business finances.
8. Keep marketing
Marketing expenses are usually one of the first things cut during tough times. But to stay viable, you need to have a presence. Consider increasing your email marketing efforts to stay in front of your customers and out in front of your competition. Reduce and reallocate advertising dollars to lower-cost social media efforts and referral programs. Leverage your current customers and let them know you're there to help them with solutions that matter to them.
The bottom line
Effective cash flow management can provide more stability right now and allow you to focus on day-to-day business operations and plans for your future success.
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The information provided is not intended to be legal, tax, or financial advice. BB&T hopes you find this information useful but we cannot guarantee that it is accurate, up to date, or appropriate for your situation. You should consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.
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