The harsh and shocking effects of the coronavirus crisis are being felt through all parts of society, in every aspect of all our lives.
Small businesses are being hit particularly hard. Some self-employed people have spoken about facing financial ruin.
What can poor cashflow management mean for a business?
As all business owners know, cashflow is hugely important at any time. In fact it is an SME’s lifeblood, and the old accounting adage that cash is king was perhaps never truer than it is right now.
Without effective cashflow management, firms may be unable to pay suppliers, cover immediate needs, and could ultimately go bust in severe cases.
Few businesses shut down because they’re not profitable, but many do because they run out of cash. In fact, some 82 per cent, according to a study on failing US businesses in 2017.
Predicting cashflow in tough times
Predicting cashflow has never been more difficult or more significant than in these uncertain times.
Credit can help but only go so far, and when loans and cards have been exhausted, you must have cash or face the nightmare of closing down.
With this in mind, bookkeeping software is perhaps even more vital than ever. After all, it’s the best move to manage your finance and control every penny.
This will help you track and report on key business metrics such as accounts receivables aging, operating margins and inventory turnover. With this information to hand, you can keep control of your cashflow successfully. More on this later in the article.
What else should you be thinking about to maintain a healthy cashflow?
It’s not just about invoicing, it’s about collecting the revenue. At the heart of cashflow is effective and accurate accounting and reporting. It’s vital this is regularly updated and to ensure you can see everything clearly at a glance. Again, a good bookkeeping program can make all the difference.
It can be tough to strike the right balance with customers, but it’s important to not be overly lenient when chasing invoices.
Are you watching your accounts receivable turnover closely and constantly? You may have to increase your efforts at chasing payment if you spot that it’s going up.
Do you keep your business and your personal finances separate? If not, why not? You really can’t afford to if you’re trying to get a full grip on understanding your business cashflow and forecast how it might change. Mixing company and personal finances creates confusion and uncertainty about how your firm is performing.
What about other help from banks and lenders?
It’s worth looking at what the finance industry says about the current situation as well.
UK Finance, the collective voice for the banking and finance industry, had this to say: “Banks and other finance providers recognise that the cashflow of small and medium sized businesses may be disrupted by the impact of the coronavirus (Covid-19). The banking and finance industry is committed to supporting viable businesses in continuing to trade while they implement contingency plans.
“Small business customers who are worried about cashflow issues should find out more information from their bank or finance provider as soon as possible regarding the support that is available to them. This could include the recently announced Coronavirus Business Interruption Loan Scheme (CBILS) which has been designed to help businesses manage their finances given the unprecedented situation many are currently facing where lenders cannot do so on their normal criteria.”
How can KashFlow support during this crisis?
As mentioned earlier, having great bookkeeping software can be vital to managing cashflow well.
KashFlow does exactly this and helps you by providing:
- An overview of your business finances every time you log on, 24/7, anywhere you are
- Automatic bank feeds that simplify reconciling your bank statements
- Simplified payment processing
- Greater control of the cash flowing into your business
- no-touch payments online via integration with Square
Keen to discover more? We’re giving you a free trial for 14 days. Try it out here.