The coronavirus pandemic continues to force the global economy to change and adjust, with many small businesses getting caught in the fray. For small business owners across America, times are tough and the future seems rocky and uncertain. In the face of this virus, there are ways that you can put your business in the best place to succeed.
In our latest blog, we walk through some of the best tips for your business to stay afloat and potentially thrive in the future. Even in a pandemic, there are ways that you can make your business more recession-proof.
Manage Your Invoicing and Collections Well
One of the biggest challenges for businesses, recession or not, is invoicing and collections. Once times get tough, vendors receive payments later and later than they are supposed to, which has a domino effect on your business. If you can’t get money in for months on end, it can ruin your own internal finances and decisions.
To mitigate this, check to make sure that your invoicing and collections procedures are top-notch. This means contracts that are air-tight, regular check-ups on clients, and having a procedure for handling disputes. This way, you can be ready if clients decide to pay you late.
Build A Cash Reserve If Possible
Another great way to prepare your business for stormy markets is to have cash stored up for times like these. Even if the world is normal, it’s important that any business has money set aside just in case.
One of the main reasons to have some sort of cash reserve is to give yourself options in the event that something happens. Issues with inventory, damage to property, or a pandemic could all hurt your normal revenue/expenditures. Cash on hand gives you a little more freedom to handle those types of situations.
Just like with personal finance, though, it can be tough to raise that money, set it aside, and actually keep it there. If you need help with building a cash reserve, our CPAs can help you make an action plan to build up sizeable savings.
A great baseline to shoot for is one month’s worth of expenses, but having more on hand likely wouldn’t hurt. Having cash-on-hand can also give you a chance to experiment more with your business since you’ll have a cushion to fall back on. The only drawback is that money sitting in an account isn’t being invested, so you may want to find a good balance for your business.
Take Advantage Of Government Help
The federal government has periodically been offering small businesses assistance through the CARES Act, which offers a certain amount of money that can be used by businesses. The money is used for expenses like payroll and can provide a cushion for your business.
If your business is already hard-hit by the COVID-19 pandemic, it may be a good idea to apply for a loan through the program and receive some federal relief. There are restrictions on how the money can be used, though, so be sure to have a good understanding of the loan requirements before sending the money.
Optimize Your Inventory/Operations
There are few better times than now to take a hard look at your inventory and operational procedures to optimize them. Businesses can lose thousands or even millions each year by simply being inefficient and not adapting. In a pandemic, you’ll need all the money you can get.
For inventory, watch the market very closely and try to be conservative with your orders. Having too much inventory could mean selling your products at a discount or loss, which is less than ideal for business.
As for optimizing your operations, you’ll want to do that even if your business is in a good position heading into a possible recession. The reason is that you can save time and money, as well as have your company ready if the recession does affect your sector of the economy.
Reduce Your Expenses
This is a big tip: reduce your expenses any way you can within reason. This can take many forms; cutting payroll, outsourcing, axing unprofitable services/products, and other tips are great for reducing your expenditure. However, you don’t want to go overboard. Make small changes in the beginning, and make more drastic changes as they become necessary.
As you reduce expenses, use that money to invest in more profitable areas of your business or set the money aside like the previous tip. That way, your business can be in a good position if you begin to feel the heat from a rocky market.
Manage Your Debt
It’s no secret that America has become a debt-based economy. Debt is everywhere in this economy, from personal finances to large companies and even the government. However, if you can handle your debt to put you in a better position, then you should do it.
Get rid of as much debt as you can before a recession hits, and try to avoid taking on more if you can help it. Cut expenses and go for loans from the government like the CARES Act mentioned earlier, instead of going to private loans.
Wow Your Current Customers
To keep your revenue up, you should pull out all the stops for your current clients. Try offering special offers, new services, or improved customer service to convince them to stay. Consumers are looking for the best ways to spend their money during these times, so be sure to make your services/products a must-have for your current clientele.
Keep Your Marketing Budget Up
Finally, resist the urge to reduce or eliminate your marketing budget. It may seem like a good idea, but a reduction in marketing will reduce your overall revenue, which can make it harder to adjust if your business is hit by the market slowdown. Keep your marketing budget so you can still receive revenue.
Choose Sovereign CPA To Navigate Your Business!
Sovereign CPA specializes in getting businesses in a good financial position, especially in times like these. For expert financial advice and services, contact us today!