As the economy opens up, following the slow phasing out of the nationwide Covid-19 lockdown, many businesses are returning to work.
For small to medium-sized enterprises (SMEs), who have lost out on eight weeks of trade, the process of reopening their doors and scaling up production is going to be difficult.
Reliant on a steady cash flow, small businesses will need to ensure that they are prepared for late payments, disrupted supply chains and cash-strapped consumers.
“It’s going to be difficult for small businesses to manage their cash flow over the coming months. The uncertainty on how the lockdown levels are going to be implemented makes it difficult to forecast expenses and revenue,” says Daniel Goldberg, CEO of Bridgement, a fintech company offering digital invoice financing and credit facilities to small businesses.
“The foreseeable future is not going to be easy for SMEs. They are facing shortages of staff, delayed operations and ultimately reduced working capital for their daily operations,” he says.
Goldberg offers some cash flow advice to SMEs as they prepare to open their doors and begin trading:
- Spend strategically – be careful about spending existing cash on hand on short term opportunities, which may not provide long lasting results for the growth of your business. Ensuring you have a stable cash flow is crucial during this period.
- Rethink your customer base – most consumers are going to be cash strapped and under financial pressure, which will impact how to communicate and market your products and services to them. Think strategically about whether you’re going to need to revise your offering to suit a new market and attract a different price point.
- Be upfront with your creditors and debtors – keep an honest line of communication open with your creditors and debtors. Work with your creditors on repayment plans that take the uncertainty regarding the phased approach into account. Have similar conversations with your own debtors.
- Support your employees – be honest and supportive of your employees during this time of extreme uncertainty. Overall communication regarding job security will help motivate employees to help the business reopen or scale up.
- Make use of government and private relief packages – support and funding is being made available. Most are soft loans that charge low interest rates and even no interest for a period. These loans can typically be paid back over five years, allowing sufficient time to resume business operations before payments are due.
For cash-strapped businesses, taking on additional financing can help provide the working capital needed to re-open and scale up your business again. “The cost of credit has gone down, helping put more money ultimately into the pockets of business owners and consumers, which is crucial at this moment,” says Goldberg.