Managing the Finances of Your Startup, Small or Medium-Sized Business Amidst a Global Pandemic



Global financial markets are facing extreme volatility — swinging plus or minus 10% during the period of a trading day. In times like this, it's natural that you'll be worried about how your business can weather the storm of uncertainty.

There are proactive steps that you could take so that your working capital remains all the way to possible. Considering these steps will be particularly important if you are investing in growth a lot during the last period of time or your company is not yet profitable.

More proactive debtor management
Firstly, let's look at how you are managing your debtors. Those who owe (or will owe) money to your business are a fantastic first port of call for shoring up your cash on hand.
Credit control and chasing late payments
The first and most obvious place to begin is to increase your focus on credit control. Now is a great time to check what invoices are outstanding and what might be owed to you. Prioritize chasing people who are outside of their credit terms for immediate payment and perhaps think about sending increased reminders as payments approach the due date. In general to make certain you will need to increase the monitoring of your invoices and payments. Increase your accounts reconciliation cycle, increase your billing frequency, increase your reminders. The game is: increase your monitoring to increase your cash.
Late penalties and fees
In a similar vein, it's now time to start thinking about late payment penalties. Personally, I've never been too draconian with this and have only once had to use the ‘threat'of late penalties to encourage payment but it's worth considering. Check out what your countries legislation helps you apply concerning late penalties and ensure that clients know that you'll see penalties for late payments. Almost all of the important if you've never used late fees before.
Now that the more unpleasant or stressful aspects of debtor management are remote you can find other techniques to proactively increase cash on hand.
Discounting to increase cash on hand
Are you ready to offer early payment discounts to clients (or if you're a physical goods company a ‘cash on delivery'discount)? Using early payment discounts is a superb example of a ‘double-win '. It benefits you because you're increasing your cash on hand and it benefits your clients because they're enjoying a mark-down on expected pricing.
Request early payments or renegotiate payment terms
Just remember that not every business is going through a challenging time in this climate. And, some cash-rich businesses may amenable to pay early even without a discount. Ultimately, until you ask you don't get.
One thing you should definitely consider doing though is assessing your payment terms. Learning the typical payment cycles are for your industry and try and get close to them. When times are good it's easy to relent on extremely long payment terms or simply pay no attention to them, but if you're going through a period of needing to really actively manage your cash flow I'd strongly recommend looking at your payment terms and trying to negotiate them down.
Managing your creditors
Now that we've looked at managing debtors let's turn attention to those that you need to pay during this time — your creditors.
Request credit term extensions
Some of your suppliers might be willing to extend credit terms — even a simple extension from 30 days to 60 days could have a dramatic effect on your cash-flow management. It's worth assessing what payment terms happen to be on with your suppliers at present and prioritizing the ones that would make a dramatic difference to your cash-flow.
Stop early repayments
If experts the habit of paying invoices after they arrive you might want to revisit that practice. Why not use the full credit-term accessible to you? In the short-term that money is better in your account than your suppliers '.
Assess the impact of late fees
Sometimes, taking a small hit on late fees might be worth it. Like that the obvious way to manage a credit card is paying the balance in full over here there are months where your cash-flow just isn't working out that way and going with the lowest interest is the obvious way to manage debt (usually).
Prioritize business-critical payments
You're managing your working capital to keep your business afloat. So, you want to be certain that it does stay afloat and in case you have critical suppliers you have to make sure quite possibly paid so that they don't cut off supply.
Slow procurement
It is too early to start backing out of new contracts, joint agreements and other things that will grow your business but one thing that you might want to consider is slowing new procurement. That going quiet altogether but instead of rushing things through spend some time and be really sure before you commit to new payment commitments or purchases.
Other tips that are worth considering
Assess in-country governmental support
Many countries'are putting together financial support packages for businesses. It's really worth thinking about how your business might access these if it's necessary.
Obtain or increase credit facilities
Similarly, many countries financial institutions are being prompted to increase lending facilities so if you've never had access to them before now might be the time. Speak to your bank about what might be accessible to you and remember that interest rates are falling so this might be fun to consider credit.
Sale of non-essential assets
Assuming you have assets that are non-essential or aren't being used that are worth some money it's fun to start eliminating them.
Leverage wholly-owned, unencumbered assets
If your business owns large, expensive assets (plant machinery, buildings, lots of stock, etc.) then you could most likely leverage these to raise debt at an even more competitive rate. Start thinking about what your assets might be worth and the way to raise finance secured against them. However, you should consider that if you are raising debts against currently unencumbered assets quite possibly becoming even less liquid.
Communication is key
If your company is struggling the worst thing you can do is stay silent. Speak to suppliers, customers, debtors, creditors, investors, banks, etc. in an appropriate way. They could be ready to help you.


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