Most of 2020 was a year we’d all like to forget insofar as it was tremendously challenging for business, healthcare providers and people due to COVID-19.
In the U.S. and globally, lockdowns, with social distancing and other pandemic restrictions, were tolerable for a few weeks; however, as the months rolled on, frustration ended in protests which exacerbated the spread of coronavirus. With vaccination rollouts, slowly, life got back to a new normal.
Since reemerging from lockdown, many USA states have had an alarming rise in new cases of Coronavirus. Florida, Arizona and California – the sunshine states have people worried about the potential of contracting the virus. Other states are not clear either, and daily cases are still in the tens of thousands across the nation.
The business community has been left wondering where this pandemic will leave them – in business or not?
How small businesses can successfully navigate COVID-19 and economic fallout
The focus is on cash flow and liquidity and options for business loans to keep afloat. Plus other strategies they can use financially to continue.
The following are tips for small businesses as uncertainty and declining market are likely to continue for the short-term, at least.
Not all businesses needed to address any potential cash flow and liquidity issues during the lockdown.
However, reemerging to full operation and production requires a lot more working capital. Therefore understanding the difference between liquid and illiquid assets is a must for businesses needing to fund their own way to business as usual.
So what is illiquidity? It’s the opposite of liquid assets which can be turned in cash quickly.
Do you have liquid and illiquid assets in your business? Hopefully, you’ve got a good portfolio of both types of assets to serve your business well.
Plus, rather than resorting to selling assets, there are other strategies you can implement to improve your cash flow. For example, focus on your debtors and provide incentives like discounts to customers who agree to pay their invoices faster than the due-by date. Also, consider using a debt collecting agency for large outstanding payments.
For your business purchases where payments are due, work with your vendors on longer repayment timelines. Many vendors will be willing to work with you, but they are also facing their own issues.
You can also get more credit, where a small business loan can come into the equation.
There are different types of small business loans and if Covid-19 impacts you, you may be able to apply for a low-interest SBA loan.
As you move forward, keep a careful record of all your losses related to the virus and shutdowns, as well as losses that occur throughout phased reopening.
When you keep good records, you’ll be better positioned to make a claim for your business insurance. There may also be help available from the federal government and your local small business administration.
To get a true understanding of your losses, you’ll need to calculate a baseline from the past two-to-three years before the pandemic.
Another benefit of carefully maintaining your records during this time is that it will give you a full picture of your financial situation. If you face serious trouble, you’ll be better positioned to figure out ways to remedy it by recognising it early on.
Don’t Get Overwhelmed by Late Payments
If you aren’t able to pay your bills right now, you aren’t alone.
Many small business owners are in the same position, but they can not simply ignore the requests due to late payment fees. This can mean you end up paying a lot in late payments, and it can be harder to get yourself where you need to be as you recover from the fallout of Covid-19.
Instead of ignoring anything, be in constant contact with people you owe money to. Let them know the situation as soon as you can, and see what you can work out.
Can You Cut Spending?
There may be avoidable expenses that you can identify. In some cases, you may realize you can continue cutting those costs even after the immediate effects of Covid-19 start to subside. For example, maybe you’re paying for a larger space than you need, or perhaps you can reduce your ongoing overhead by continuing to have your employees telecommute aka remote working.
Where are the areas you can focus on optimizing your burn rate?
Are there places you can both cut expenses and perhaps improve your own output and productivity?
Out of every crisis comes opportunities, but you have to take yourself out of that emergency survival mindset and move into innovation.
Take the time to look at your industry and competitors and what the future might hold in your market.
Are there new opportunities you can take advantage of now?
How might this situation positively transform your business?
You could find that when social distancing measures are entirely removed, you’ve added a new source of revenue or made your business leaner without sacrificing quality.
Finally, explore all financial assistance options. There are city-based options as well as state and federal programs. There are also programs specifically for certain businesses for minorities or woman-owned businesses.
There’s a lot out there, but it takes time to look and find financial resources. While small businesses are undoubtedly hurting right now, it doesn’t have to mean the end.
Consider getting a mentor or business coach to lean on for advice and support as you navigate the new normal post-Covid-19 lockdowns.