Small business owners know very well how challenging it is to run the business. Now that we are passing through tough times due to the Covid19 pandemic, the difficulty level to maintain the business operations has gone up many more times. Moreover, the challenges they encounter are just one of its kind that makes it more challenging to cope with, feels Eric Dalius, a veteran of many entrepreneurial battles. Although the government has tried its best to support small businesses by providing the stimulus package of $2 trillion, it will not alleviate all the worries that business owner’s face, especially managing finances.
Managing cash flow is always difficult for small businesses, and the special situation that they are now facing has compounded the difficulty many more times. Here are some tips from Eric J Dalius that should help small business owners to take their businesses out of the crisis.
Optimize cash flow
Business owners must now apply their best skills in managing finances but must tailor it to suit the situation affecting one and all, including their suppliers and customers. Dealing with people sensitively will help to receive the most beneficial response. You must communicate the most unpleasant things to them in the most acceptable manner with the necessary sugar coating that demonstrates your empathy towards them and generates a feeling of your readiness to share their woes without giving up your interests. Mind that you do not make them feel comfortable but at the same time, express your need.
When you owe money to several people, reach out to your customers proactively by prioritizing the bills that are past due, and need immediate attention to keep the cash flow smooth, feels Eric Dalius. Consider the level of business operations happening at different places because the restrictions might not be the same everywhere. Where the business is more or less regular, you can think of reconsidering the payment terms.
Rely on the three forecast model
Whether you are your accountant or hire someone to manage your accounts, create three forecasts – the first is an optimistic one, the second is the realistic and most likely one, and the last is the worst-case scenario that considers what might happen if all customers who owe you money fail to pay for whatever reasons. The model will help you maintain flexibility and counter the ever-evolving situation that can change almost every hour. Based on the scenarios, you can use the forecasts to see if you have a shortage or surplus.
Become a spendthrift
To cover the shortage, you must minimize expenses as much as possible. Cut down all discretionary and capital intensive spending. You cannot avoid some unavoidable fixed costs like rent. Try to renegotiate your terms with the landlord and see if you can defer payment by availing of rent holidays.
If you have a plan and can convince your landlord, there are high chances of succeeding. Take all possible measures to avoid impacting people, which might become inevitable after some time.