The quick spread of the contagion not only created a health crisis but also triggered a massive financial crisis across the globe. With a total halt on economic activities and disrupted supply chains, businesses around the world are experiencing a sharp economic downturn, with financial casualty worse than WWII. It is amidst such times that maintaining a strong customer relationship, and having a seamless cash flow becomes all the more crucial for businesses to keep themselves afloat. Here are the 5 best practices to maintain regular and constant cash flow.
How Can Businesses Maintain A Steady Cash Flow?
Invoicing will make a huge difference for businesses to control cash flow. Keeping in lines with this, businesses should send the invoice to their clients as soon as the work is delivered. Generating invoices on time will help reduce the time to receivable, hence providing businesses with steady cash flow. Businesses can opt for sending e-invoices to receive payment and reduce paper trail.
Reducing Overhead Costs
One of the proven ways of optimising cash flow is by cutting down expenses. As a rule of thumb, ensure to go through the overhead expense and see whether you can reduce cost. Can you cut back on rent to save money or cancel subscription payments for things you don’t commonly use?
Be Customers Agnostic
The pandemic crisis has impacted all strata of the financial ecosystem. During such circumstances, it is crucial to have a strong and loyal customer base. Show support to your customer by offering discounts or running offers for them. Additionally, the pandemic outbreak has compelled many businesses to expand their product offerings according to the market needs, provide superior payment options and contactless delivery to offer enhanced customer experience.
Concentrate On Inventory Management
Having a fair idea of the inventory is considered crucial to forecast supply-demand level and cash flow for businesses. Perform regular inventory checks to analyse what’s in demand and what’s not. This will help you plan out the inventory and get rid of dead stock at a discounted rate.
Opt For Alternative Lending Options
In case your business is undergoing a cash flow crisis, think of alternative lending options like invoice discounting. A short-term way of generating quick working capital, invoice discounting allows businesses to sell their invoices at a discounted rate to get immediate cash flow, thereby assisting in growth and expansion. Being a no-collateral financing solution, invoice discounting allows businesses to raise funds without impacting their balance sheet. Since the collateral is built into the agreement, the money borrowed is a percentage of the value of an existing invoice. It is this that acts as collateral – implying that invoice discounting poses a considerably lower risk for those that it is available for.
Look Out For Alternative Revenue Generation Stream
In case the current situation is creating pressure on your existing revenue streams, think of alternative ways to generate profit. For instance, the pandemic outbreak and the ensuing lockdown has deeply impacted many bricks-and-mortar stores. To combat the drop in revenue, many are shifting their businesses online and offering pickup and delivery services.
A pandemic outbreak is something we haven’t witnessed before. However, if history has taught us anything, it is this that after every market downturn, recovery happens. To survive in the post-COVID-19 world, businesses will be required to chart out their cash flow, increase orders, and operationalise quickly.