Managing Cash Flow In A Crisis

In times like these, cash is king. The coronavirus pandemic has taken the world by surprise and the main priority of many businesses, large corporations and SMEs alike, has shifted to cash flow optimisation and survival. According to the World Bank, Malaysia’s economy is likely to contract by 3.1 percent in 2020 – a scary statistic for many business owners. This, paired with JP Morgan’s findings that half of small businesses only have a cash buffer to allow them to stay in business for 27 days, necessitates a focus on cash flow for many businesses.

Here’s what Curlec has to say about effectively managing your business’s cash flow.

Wait… What is Cash Flow?

Cash flow is a measure of the amount of money that flows into and out of your business over a given period of time. A business can be cash flow positive, which means that more money is flowing into the business than out of the business, or cash flow negative, which means that more money flows out of the business than into it.

Operating, financing and investing activities cause changes in the cash flow of a business.

Why does it matter?

Managing and optimising your business’s cash flow effectively is essential in ensuring business survival, especially in times of financial hardship brought by the COVID-19 pandemic.

A wise (wo)man once said ‘cash is king’ and at Curlec, we second this view. This is why Curlec recommends Direct Debit to optimise your business’s cash flow.

Cash flow is essential for daily operations, paying bills and to cover day-to-day costs. Cash flow also gives you business greater flexibility – be it with purchasing decisions, debt management and credit acquisition. Moreover, in order to grow your business, you’ll need to reinvest and in order to reinvest, you’ll need cash.

Managing your business’s cash flow means that you know when money will be flowing into your business and optimising it means trying to get more money to flow into your business at a quicker rate.

The goal is to always be cash flow positive. Learn how Curlec can help with this here.

Tips on how to manage your cash flow…

First up, don’t panic! We know it can be stressful trying to keep your business afloat during these uncertain times but panicking isn’t going to help. Try talking to key stake-holders in your business and be transparent about the issues that you’re facing. Those who know your business well may be able to help you think of ways to increase the rate of money flowing into your business. Think outside of the box! We’re currently facing a global pandemic and nearly all of us are facing economic conditions that we’ve never faced before. You may need to be creative with your ideas in a situation like this.

Here are some short-term and long-term ideas to get you started.

Short-Term Solutions:

Monitor Your Accounts Receivable

Accounts receivable is simply any money owed to your business from your customers. The goal here is to expedite your receivables. The first step is to solidify the basics: timely and accurate invoicing and switching to electronic invoicing could be a more efficient option. Another option to consider is shortening payment terms, thereby allowing you to expedite your receivables in critical times like this. Your business’s payment terms and payment collections process is crucial in ensuring a stable and healthy cash flow. When you have more time, think about whether your payment process supports cash flow optimisation.

Read more about Curlec and how we can help with this here.

Extend Payables

This refers to the money flowing out of your business. Think about ways to reduce the amount of money flowing out of your business by delaying payments. We recommend caution when doing so. Be transparent with suppliers and communicate with them in order to preserve your supply chains.

Reassess Variable Costs

A simple way to do this is to reduce discretionary expenditure. Consider reducing full-time work to part-time work, if possible, in order to reduce labour costs or consider operating a work from home program, if you don’t already have one, to reduce commuting costs and potential rent expenditures. Some solutions could also be as simple as providing fewer snacks in your office pantry!

Long-Term solutions:

Select A Payment Method That Provides Long Term Cash Flow Stability

Cash flow stability means that you’re confident that more money is constantly flowing into your business than out of your business. Curlec is here to help you manage your business’s cash flow with Direct Debit. Automating your payments with Curlec means that you know exactly when you’ll be getting money from your customers and ensures that these payments are always made on time. If your current payment method doesn’t support cash flow stability, consider making a switch.

Request a demo from Curlec here.

Reassess Fixed Costs
In uncertain times like these, a good option is to consider converting fixed costs to variable costs where possible. Think about leasing large fixed assets instead of purchasing them and reassess your business’s investment plans. It’s probably not the best idea to be making risky investments right now and doing so could destabilise your business’s cash flow even more.

The COVID-19 pandemic has brought to light the importance of a steady and healthy cash flow for all businesses. Cash flow optimisation is not always an easy task, especially when operating a business model with a heavy reliance on recurring payments.

Curlec is here to make your payments collection process seamless with Direct Debit. Get in touch with us to find out more about how your business can automise its payments collection process.