There are many businesses at some time or other that go through financial downtimes. However, Covid-19 has brought on a business slowdown of mammoth proportions. Every business in these times has to count every cost, look for ways to reduce expenses and find ways to manage a healthy cash flow.
Find out how your business stands
Cash flow analysis is a record of your company’s cash coming in and going out over a certain period of time. These records give you an understanding of the health of your business. The record will no doubt be requested by investors or lenders as part of their evaluation as to whether a business is a risk or not.
The Accredit team empowers people with sound business solutions and by requesting a business credit report, a business can establish a client’s risk profile or even their own before lending money or requesting money from a lender.
When you need a business loan or you want to build payment terms with a new vendor, a business credit report from accredit can provide some valuable information on cash flow and other historical data.
Look at reducing variable costs
Every company has variable costs – those expenses that change, that increase or decrease according to the company’s production volume. During a slowdown, it is important to look at reducing variable costs to reduce cash outflows.
There are always those typical variable cost-reduction aspects that are already in place because they’ve been imposed on a business. An example of this is travel bans and another is not being able to host meetings and conferences. Maybe now is the time to find a cheaper way to ship your products.
But now is also the time to be thinking about how you can actually change fixed costs into variable ones. Every business needs to look at ways to reduce spending and sometimes, this may require layoffs. Sad though it may be, jobs often get more efficiently done with less staff.
Is your financing viable?
In these pandemic times, a business can’t just assume that the financing options they’ve always had access to are still available. They may not be. Nothing is the same anymore, and a business has to make contact with its financing partner to ensure that their lines of credit are, in fact, available. If not, it may be time to explore new options if needs be.
It’s all but impossible for a business to expand in slowdown without funding, what with banks declining loan requests. With the slowdown, banks have increased their credit score standards.
What if your business has a credit score that is too high for a loan? If a bank declines your loan request and you need to know why, get a business credit report and then look for alternative funding. The lender will then create flexible terms for those businesses wanting to grow their business during the slowdown.
Negotiate better credit terms
Even without a slowdown, establishing amicable relationships with your suppliers is always going to be an important strategy. There will come a time when you want to knock on their door and bargain for better payment terms.
By paying your suppliers in a timely manner will let them see that your business is trustworthy. All businesses are experiencing the same cash flow problems. If customers do pay you within 60 days of a product being delivered, but you pay your suppliers within 30 days, that can create cash flow problems and it may be time to negotiate different terms.
Certainly, if you have already built up a good payment history with your suppliers, they will likely be willing to extend your payment terms if that will help you. During these difficult days, most suppliers are more than willing to provide improved payment terms just to hold onto a good customer.