The current global economic situation we find ourselves in is impacting many businesses and individuals around the world. Supply chain disruptions and reduction in many people’s disposable income means that your business is likely struggling with some kind of cash flow challenge at the moment.
Cash flow is the lifeblood of any business. In order to keep running smoothly, your business needs incoming revenue on a steady and predictable basis. When cash flow is reduced or curtailed, businesses need to adapt quickly in order to survive. The focus for many businesses now will be to protect employees, understand the risks to their business and manage supply chain disruptions. We’ve put together five cash flow tips to get your business back on its feet in these challenging times.
Tip 1: Take control of your finances
Let’s begin with small wins. Start by examining any regular expenses that you can cut back on, such as debit orders or subscriptions to services that you no longer use or don’t really need. Unsubscribe from any unused subscriptions and cancel any auto-renewals. You want to be in full control of your finances at this time. Prioritise your expenses and decide which are non-negotiable and which you could easily cut back on. Small changes can bring about big shifts – you could save 100 to 1000 Dirhams a day by making this change alone.
Tip 2: Add up all the money you have saved by not going out
We’ve all been focusing on how our revenues have been reduced, but it’s worth noting the savings you have made because of this current situation. Every penny saved is a penny earned! Not going into the office means savings on fuel, ten or twenty take-out coffees a week, and reduced eating out expenses. Add up all the expenses you have saved on by not going out – the number will be in the 1000’s of Dirhams.
Ask yourself whether you will be going back to the same kind of expenditure. It’s likely that we will continue to spend on what we really love, but we can choose which expenses we will not re-incur.
Tip 3: Negotiate
Negotiate anything and everything you can with landlords, financial institutions and vendors, so as to ease payments such as rents, credit cards, and loans. Some financial institutions may not be announcing their relief measures but rather evaluating applications on a case-by-case basis.
Banks might offer a payment holiday, and some are offering 50% off the interest accrued at the end of two months. Some landlords have flatly refused to defer rents, while others are extending their contracts. If you have the money don’t defer, rather make the payments that you can. Don’t be afraid to negotiate, but don’t negotiate out of fear and remember to read the fine print.
Tip 4: Collections
Focus on your older collections first, and use all available channels of communication, be that emails, phone calls, or Whatsapp. Speak to different people if needed, and don’t close the conversation if they say they aren’t able to pay – get a date on when you can collect. If that keeps happening, negotiate on part payments, but collect whatever you are able.
For future collections, make sure your invoices go out on time. Make your invoice stand out – all invoices tend to look the same, and psychology says that if your invoice is in yellow then it’s likely to be attended faster.
Ask your debtors not to give you cheques but to rather do online transfers. Ensure that you can receive online payments and credit card payments – make it easy for people to pay you.
Tip 5: Communicate with your customers and suppliers and manage inventories
The last tip is actually two tips combined because they are related.
Businesses are at different levels of operation, therefore keeping in touch with your customers and your suppliers will help you forecast your cash flow requirements for the upcoming months.
Check your inventory so that you know what you currently have, the time frame within which it will be used, and whether it is something that needs to be used within a certain time. Understanding what the current inventory levels are, when the next inventory can be fulfilled, and what your clients need will make it easier for you to be prepared.
As a classic example, a business owner might have to deliver certain items to their clients but their factory is in China. Taking control of their current stock, and speaking to their clients to get their forecast, means that they can allocate the supplies that they currently have to their bigger clients and manage the rest accordingly.
You could even collaborate with your competitors for bulk buys, bulk deliveries, or bulk discounts, whatever is possible.
The unprecedented circumstances we are in have brought sudden and far-reaching changes to our economic landscape, which have left many businesses unsure of the way forward.
Xcel accounting is committed to helping Dubai businesses take the reins on their finances and we can help your business in aligning resources with strategy and adjusting to changing conditions.
We encourage you to take advantage of the cash flow tips and to share any information you have on offers received as well as your experiences in the comments section.
