With the COVID-19 pandemic sweeping the globe, leaving humanitarian and financial destruction in its path, all businesses in the UK and the rest of the world are suffering.
With the COVID-19 pandemic sweeping the globe, leaving humanitarian and financial destruction in its path, all businesses in the UK and the rest of the world are suffering. While it is expected that many businesses fail in the UK (especially new businesses), now it is expected that even more businesses will be closing their doors permanently as cash-flow problems are on the rise.
Cash-flow is the heart of any business. It is used to pay for day to day operating expenses. When cash-flow is compromised, the entire business is negatively impacted – this is a commonly known fact.
UK Business Failure Rates?
The Telegraph released some interesting statistics that 20% of these businesses go bust in the first year and a further 60% of those businesses typically follow suit before 3 years have passed. The very same article implies that it is poor money management, among various other reasons, that so many businesses seem to fail in the first 3 years of operation. When one thinks of poor money management, cash-flow certainly comes to mind. Now, with COVID-19 to deal with, it seems as if those figures are going to vastly change.
How to fix cash flow during pandemic?
There are a few things that you can do to start correcting business cash-flow problems, while the pandemic crisis rages on.
- Adjust your business plan to maximise profits.
- Offer incentives for upfront payments.
- Consider your borrowing options
- Cut down/sell non-essential assets
As unemployment rises with business closures in response to the Coronavirus pandemic, business owners need to take an innovative approach to what they do next.
Step 1: Improve Profit Margins by Adjusting Your Business Plan
Scrutinise your business plan, operations, expenses, and processes and determine why you ran into cash-flow problems in the first place. You need to strategize in such a way that this is not a possibility in the future. Take a clear look at your financials, so that you can see exactly which areas of the business are making the most money and which are using the most with little to no return. This means looking at the jobs you are bringing in, the clients and what sort of deals you have with them, events you are hosting, products you are acquiring, and the various marketing efforts you have in place. Doing this will help you to identify which customers cost you more than anticipated and where you can optimize your prices and cut back on unnecessary spending and operational waste.
Step 2: Offer Incentives for Upfront or Pre-Payments
Think about offering incentives for pre-orders and upfront payments to your customers. Many businesses are struggling through COVID-19’s impact on sales. Demand has dropped, suppliers have ceased operations, and even though doors are closed; employees need their salaries. Chances are that you already depleted your available cash-flow and are now in a proverbial “financial pickle”. Now is the time to think out of the box. Offer your existing customer base something special. Lockdowns and reduced business won’t be a ‘forever’ thing and when the COVID-19 dust settles, your business will be able to get back to, well…business. Prepare for that time by offering customers the opportunity to pre-order stock, pay up front and receive a discounted rate. You can use COVID-19 to offer a “COVID-19 Price Slash” too. Think ahead and be as innovative as possible in generating fresh income at this time.
Step 3: Consider Your Borrowing Options
Consider what your borrowing options are. Governments across the globe are offering their citizens stimulus packages to ensure that economies can get by, small and large businesses can receive some financial relief, and employees can get paid their salaries even though there isn’t a source from their actual employers. It’s much the same in the UK with the government offering as much relief as it possibly can. This financial aid is readily available, but may prove to be a lengthy process. Business owners need to apply for such aid via the government.
An alternative route that is being taken by business owners across the UK is that of unsecured short-term loans, such as those offered by SME Loans. This proves a popular alternative as all small to medium size enterprises can apply for quick approval – even those with a less than perfect credit score.
Step 4: Sell Non-Essential Assets
Get rid of assets that aren’t essential to your business right now. Selling of non-essential assets is a temporary yet highly effective way to turn a cash-flow problem around in a time of crisis. The sale of non-essential assets will help you to raise much-needed cash quickly, especially when faced with a financial crisis. At the very least, it can buy you some time.
If you can rescue your business from cash-flow problems and financial despair during the COVID-19 crisis, you must. Consider the above cash-flow correction strategies and consider implementing them for the sake of the future of your business.
This article comes courtesy of SME Loans. SME Loans helps companies across the UK find the most suitable financing options for their business. As a credit broker, they introduce applicants to a range of different business loan providers.