We know that in times of crisis, things get very difficult, entrepreneurs depend a lot on the social and political environment that surrounds us, and just as there are good times, sometimes there are not so good times.
Similarly, this Covid-19 pandemic has wreaked great havoc on the global economy, damaging many countries and most people. The times we live in today are of the financial crisis. We do not know for sure what will happen in the future.
Therefore, it is necessary to have a plan that allows us to manage finances in the best way. So if your business has suffered a drastic drop in sales in recent months, stay tune to this post.
Here are some tips to better manage cash flow activities during crisis.
Beware of quick fixes
When panic takes hold of you, it’s tempting to turn to seemingly “magical” solutions. But be careful. For example, “quick” cash loans are very risky. Their interest rates and penalties are extremely high (often 29% and more!). Even if you borrow a small amount, it is easy to get into debt.
And, borrowing money from loved ones, is that a good idea? It depends. There are pros and cons to consider. First, ask yourself the following question: will you be able to repay your friend or your family? If the answer is no, think about the fact that this decision could hurt your relationships. Being over-indebted is not easy. But it would be a shame to complicate your situation even more by involving the people you love.
Re-launch your customer with kindness
Maintaining the link with its customers is essential but becomes vital in times of crisis. Take your best smile (because yes, even on the phone it will make all the difference) and contact them to take stock of unpaid bills.
This step is essential to anticipate payment defaults, which could harm your cash flow. It is recommendable to start with your biggest customers. Indeed, they have a higher cash flow capacity and will, therefore, be able to honor their payments more quickly as compared to certain PE / TPE.
Then, follow up with the other customers. Keep in mind that this period also creates difficulties for your clients (health, partial unemployment, etc.). The idea is, therefore, to find a compromise between their financial struggles and yours. For example, you can offer them to spread their payment. Listening and understanding will be your best allies to maintain the link with your customers!
Seek a competitive advantage
In times of financial crisis, one of the best ways is to do a market and company analysis to check how the consumer is doing and what your company can offer that is not yet available. We are talking about competitive differential. That is the product, service, or feature that only your brand can offer, unlike your competitors. Find out what your business stands out for and use it to your advantage.
Re-evaluate your products and services
How to overcome a financial crisis in the company without first reevaluating what the business is selling, isn’t it? It means when resources get leaner, consumers change their consumption habits. Therefore, it is necessary to identify the new demands that the crisis generates and to reassess all the solutions provided by the company.
The point is that the offer must be reformulated based on demand, always prioritizing products and services with higher profitability and better cash generation.
Some interesting examples are:
- Offer simpler and cheaper services
- Reward more efficient salespeople and resellers
- Give discounts for larger purchases.
Take advantage of the support plans of your financial institution
Several financial institutions have published some measures that seek to alleviate the burden on their debtors, whether they are personal loans, credit cards, or small, medium, and large business loans.
Visit your financial institution’s website, so you don’t leave your home or call the Customer Service Center and check the plan. Most of these are postponing the collection of interest from two to three months, or amortization or both; other proposals dilute a certain amount of payments in the remaining term or refinance these payments in an additional credit with a lower rate or no rate. The best option will be the one that allows you to keep more money in your hands.
Even if you have taken effective measures such as those mentioned above, but you do not give adequate follow-up, they will not work. According to experts, keep a weekly cash flow, design internal controls to ensure the minimum amounts in cash. Focus on overdue accounts and negotiate the times with your clients to pay in advance.