Business Strapped For Cash? Try This
The pandemic has put businesses big and small under almost unprecedented pressure in recent weeks, and with the amount of uncertainty around, it’s hard to imagine any organisation that is immune from the economic damage that has transpired. Obviously, rule number one when it comes to managing finances is to keep your revenue up- increasing your organisation’s revenue is, after all, the best way to climb out of the hole that you’ve found yourself in. In light of this, let’s throw around some of the most effective ways in which you can increase your organisation’s potential revenue forecasts for the coming weeks, months and years.
Some of the points mentioned here might be more applicable to your organisation than others, so take a look and get in contact with me, Kobi Simmat on LinkedIn, Instagram or Facebook if you’d like to get more advice. Also, stay tuned to our Youtube channel for more videos coming soon on managing budgets, cash-flow and analysing profit and loss statements as we navigate through a tumultuous financial time.
Start With Self Reflection
Before we continue, let’s talk about something imperative. If you’re facing financial troubles, regardless of the macroeconomic situation, is your organisation’s core offering right for the market? Is the product or service of a high quality? Does it meet customer expectations? What could you potentially improve to heighten your customer’s response and recommend you to their friends and colleagues? One of the simplest ways of transforming your finances starts with self reflection, competitive offering, a scalable business model and the confidence that your product or service can improve the lives of the people it touches.
While it might seem philosophical, if you’re bringing something to the market that is inferior, what good is making changes in the background?
Look For Opportunities- But Consider the Long Game
Recently, I’ve had a few conversations on exactly this topic, with a number of managers looking to capitalise on some of the opportunities out there in the market right now. This is admirable, no doubt, but you need to balance these with a long-term strategy for the organisation. If you’re a little confused, the opportunity they were looking to capitalise on was selling hand sanitiser, gloves, masks and so forth. For a number of reasons, China at that time was running short, and prices worldwide were sky-rocketing; an opportunity had presented itself. That was, until China got back to producing them, had a surplus and flooded the market once again, dropping the prices dramatically. While this is just one example, it’s an apt depiction on how relying on a short-term means of profit isn’t going to sustain your organisation… You need to play the long game and look at trimming the fat in your organisation rather than pivoting and playing all-in.
Carry Debt For Your Customers
This plays off in much the same way, but instead of asking your suppliers to hold on to some of the debt for you, you hold onto the debt for your customers in a measure of good faith. I’m not advocating everyone reading to take this piece of advice, because it’s inherently risky and involves a trusting relationship between you and your clients, but if you are willing to shoulder some of the debt for your customers for a number of weeks and months, they’re likely to never do business with anyone else. It’s a gesture of goodwill, a signal of trust and likely to build a fruitful relationship when the financial tide turns. At the very least, increase your terms to give your customers more time to scrape under the couch cushions. Perhaps temporarily increasing your overdraft will help you out in this regard.
Fix Big Problems for Lots of People
If you want to go all-in on one particular idea, it should be this. If you’re looking for an opportunity, solve a problem that’s impacting a large number of people, and your finances will work themselves out.
Analyse Your Supply Chain
With trade from around the world, particularly in the Asia-Pacific region screeching to a halt, perhaps you’ve found yourself looking at other potential suppliers, either domestically or overseas that are offering a competitive price. If you’re looking at the latter of the two, you need to be aware that you’re still taking a risk on an overseas supplier, and in an uncertain trade market, an interruption could be costly to your organisation’s ability to operate. If you invest instead in a local manufacturer or supplier, your organisation is essentially insuring itself in the event of an international event that potentially slows down trade; and in today’s uncertain market, it’s always good to protect yourself. The global shutdown in the aftermath of the coronavirus was perhaps the first confrontation for a lot of organisations on their over-reliance on cheap, Chinese goods, which has ultimately cost them.
Focus on the Data
With the amount of financial software out there these days, it’s never been easier and more efficient to take a look at your numbers. You should line up all your annual bank statements, have a look at your multi-period profit and loss statements and ensure that whatever the decision you make, it’s an informed decision that is driven by data, rationality and maybe a smidgen of instinct- but not emotions.
Adjust Your Fixed-Cost Expenses
We’ll unpack this point more in the sections to come, but it’s worth noting that in this current time of uncertainty, it’s become suddenly acceptable to renegotiate a number of your fixed-cost expenses that the business might incur. With the Federal government now backing flexible terms for things like commercial tenancy agreements and offering payroll tax waivers and even wage subsidies for certain eligible businesses, it’s time to realise that a number of these previously fixed costs are now actually up for negotiation- you just need to initiate the conversation.
This is more common sense than it is financial guidance, but for those that might be reluctant to make certain cuts, it’s time to look at your organisation’s balance sheet and see what money is going out that you can potentially curb, or eliminate altogether. Cutting subscriptions, and relying on your staff more instead of paying service fees can be a fairly straightforward and painless means of keeping some extra cash handy for when you really need it. Try to get an understanding of where the money is going, and how likely it is to provide you a worthwhile return on your investment. This is time to stop paying for certain conveniences, and roll your sleeves up, instead. Training up certain staff members to widen their skillset and learn new activities is a great way to mitigate the cost of paying for certain costly subscriptions.
Look down your supply chain and see whether or not they’re likely to accept a renegotiation of terms. The reality is that no one likes to lose customers, particularly in a time of crisis like this, so you’ve got some bargaining power if you assure your suppliers that you do want to continue working with them, but under a different set of terms. Hopefully, they’ll empathise, and allow your organisation an extension of the payment terms you’ve previously agreed upon. You should remain honest and transparent with these suppliers, however, I am not advocating that you short them, or play games with them. Have an open conversation about your situation, and they’ll hopefully reciprocate.
Two notable mentions for Australian-based organisations are the JobKeeper assistance and the rent relief packages, which have given small and medium-sized organisations more bargaining power than ever before when it comes to negotiating terms with their landlords, as well as economic support to keep employees on the books.