How to Manage Cash Flow for Your Business During COVID-19

Financial Support
11 May 2021

COVID-19 took the world by complete shock. As the pandemic shows no signs of slowing down, it impacts communities, ecosystems, and business operations worldwide. More importantly, the cash flow management of SMEs has been impacted to a greater extent.

As such, most businesses focus on protecting employees, understanding the risks to their business, and managing the supply chain disruptions caused by the efforts to contain the spread of COVID-19. The fast-spreading pandemic has global economic and financial ramifications that will be felt throughout global supply chains, from raw materials to finished products.

Given the importance of cash flow in times like this, businesses should immediately look for efficient plans for cash flow management. But the question is, how? Some business leaders opt to borrow from their friends and relatives to meet a short-term cash crunch. But are you sure you can meet all your working capital expenses with the borrowed amount? If yes, definitely it is a great choice. But we have some smart financing options for businesses. Well, you can use our credit line to meet your working capital requirements.

Review Company’s Revenue

Now, you probably have a good idea of how much revenue your business has lost due to COVID-19. So ask yourself: which products or services are selling well? Which aren’t? What might you change about your products or services to help them sell better and improve cash flow management?

The key is to be creative. “It’s about realigning the value of what it is you’re providing to your customers and thinking about your pricing in line with that. Analyzing in detail your business outcome and forecasting the profits for the near future will help you take the actionable step. By understanding or analyzing your business outcome and profits, you can decide how much credit you may require to run your business or work capital requirements efficiently. It can include paying employees, buying equipment, or paying rent, etc.

Evaluate Current Situation and Financial Health

Analyze your working capital. These are, of course, accounts receivable, accounts payable, cash assets, and credit facilities. Resist the temptation to be overly optimistic. For instance, don’t count on funds from clients whose accounts are already in arrears. Make sure you have a clear understanding of your credit facilities, guarantees, cash flow management, and margins.

Do you have equity available to obtain additional financing or margin coverage? Identify your priority debts and repayment concerns. You might need to negotiate new repayment terms. Government authorities are likely to be accommodating in light of the current situation.

Create Short and Long-Term Plans for Cash Flows

  • Calculate past sales and expenses – This will ensure that you understand your operating cycle. 
  • Review your sales prospects – Be realistic or even conservative in your estimates. 
  • Try to quantify the impact on your expenses – Do it to the best of your knowledge and based on your assessments of the current situation. 
  • Revise your investment plans – It is important to review your capital investment plans. 
  • Analyze your financial structure – Analyze your financial structure and repayment obligations.

Once you have all this information, you can prepare a cash flow budget to understand better what the next year will look like. Test different scenarios and see what your financial needs are.

Develop a Cash Asset Protection Strategy

Look for possible financing sources. If you foresee having cash flow issues, look for potential financing sources. Be proactive and approach financial institutions like Oxyzo. Financial service providers like Oxyzo offer unsecured credit up to two crores for businesses to meet their working capital requirements. Be smart about your working capital with Oxyzo.

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