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The Importance of Cash Flow Management for Businesses during the Pandemic

Cash Flow Management The pandemic is far from over, and it shall be inane to think that everything shall go back to normal now that the vaccines have been rolled out. It is true that people have started going back to their offices, and the economy is well on its way to recovery. However, we are still at the very nascent stage and cannot risk throwing caution to the wind. Even with the vaccines in place, we need to follow the protocols of wearing masks, social distancing, and frequent hand-sanitization if we are to win this battle against this virus that refuses to surrender. Businesses that had been impacted by the pandemic have also started to find their footing in the market again. Banks have started offering elaborate atm services, and most of our transactions take place online.

However, even though things have started to look up, we cannot afford to let our hair down and risk losing everything to the pandemic all over again. It is important to remember that the virus is still very much at large, and therefore, we must adopt all the precautions even as we go about our lives.

On that note, in the article that we have today, we shall discuss the importance of cash flow management for businesses, especially during the pandemic. It needs little mention, but to state the obvious, the pandemic has brought the economy to its knees. Businesses, especially the small ones, are in tatters. And though, as we already mentioned at the beginning, things have started to look bright, it is still too early to think that everything is back to normal. For businesses to survive these challenging times, they must pay attention to optimum cash flow management. Let us explore more about cash flow management during the pandemic and how businesses can go about the same.

Why Must Businesses Pay Close Attention to their Cash Flow Management during the Pandemic?

Cash flow can be defined as the amount of money that flows inside and outside a business within a particular time period. An ideal cash flow management shall help businesses have more money flow in than what flows out. Businesses must always aim at achieving positive cash flow so that they can buy new assets, expand their territories, work with multiple vendors and suppliers and invest in the future growth of the company.

The pandemic has wreaked havoc and led to businesses suffering from irreparable financial damages. Therefore, it is imperative that businesses have a well-defined cash flow management plan at their disposal so that they can manage their costs well, see to their employees’ well-being and figure out what they need to keep their supply system in order. Businesses do not have access to an endless supply of cash, and the pandemic has only made it more difficult for businesses to find enough money to stay afloat. Therefore, it is of immense importance that businesses have an effective cash flow management system at their disposal to navigate these grueling times.

Cash Flow Management Managing the Cash Flow:

There are several ways businesses can manage their cash flow. Reviewing your cash flow forecasting can help you figure out the amount of money that is moving in and out of your business. This process can even help you understand how much money you shall be left with at the end of the month. Now that the pandemic is still wreaking havoc in our lives, businesses might want to forecast their cash flow every month.

Try Expediting Your Receivables

One of the best ways to manage the cash flow of your business and have more money flow into your business is by managing and expediting receivables. This means that you must change the ways in which you get paid so that you can receive the money faster than usual. Businesses can start by shortening the payment period. For instance, if your business worked on a 45-day cycle, you might want to shorten it to a 30-day cycle so that you can have access to cash quickly. You could also have your vendors provide preauthorized checks so that you can immediately draw the money on completion of the services.

Try Leveraging Unsecured Credit

The next thing and perhaps the most important one that small businesses can do is leverage unsecured credit. This measure can help small businesses look into their day-to-day operations and take care of aspects like rent and inventory. This is how the entire process works. Small businesses borrow some money and pay it off using the cash that flows in. A business line of credit also comes with other benefits like having a lower interest rate and more flexible options for payment.

A business line of credit helps you use the money, pay it off and even reuse it as and when needed. Therefore, leveraging unsecured credit might be a great way of managing cash flow in businesses, especially with a pandemic at large.

Summing Up:

The world is still gauging the long-term effects of the pandemic, and small businesses are trying to cope up with the shock that they had been through last year. That is why having an effective cash flow management plan in place must be a business’s priority.
An effective cash flow management plan can help your business continue its operations even when the situation looks bleak. Therefore, follow the tips mentioned in the article or figure out your own ways for cash to flow in so that your business can survive this long haul.

Image Credits: Image 2: Photo by Tech Daily on Unsplash

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Any facts, figures or references stated here are made by the author & don't reflect the endorsement of iU at all times unless otherwise drafted by official staff at iU. This article was first published here on 19th March 2021.

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