cash flow

Markets around the world are facing new challenges as businesses navigate an unprecedented shift in spending. While business leaders are managing financial implications and an evolving workforce, small businesses are significantly impacted. There’s no doubt small businesses help fuel the global economy and provide millions of jobs. In fact, they account for 44 percent of U.S. economic activity and $5.9 trillion in annual GDP, according to the U.S. Small Business Administration (SBA). Federal and state governments, business leaders, and the community understand the importance of keeping small businesses afloat during this period of uncertainty. This bodes well for small businesses, who can turn to financial support options and also find guidance on how to minimize disruption to cash flow.

“Right now, cash is king,” says IDC Research Manager Kevin Permenter. “Managing cash flow is always important, but the only way to make it through a disruption of this magnitude is by saving as much as you can. Leaning into spend management through invoice solutions and mobile apps that are automated and leverage AI can help businesses keep the cash flowing as employees manage the sudden transition to remote work.”

As small businesses cope with uncertainty, a focus on cash flow, flexibility, and responsiveness has never been more critical. Here are five steps they can take to save money, keep their books in check, and weather the storm.

  • Reduce expenses. Cost cutting is one of the quickest ways to preserve cash. Companies should explore ways to reduce operational costs, especially if their in-office staff is reduced. For example, many cities have set up utility payment relief programs for small businesses, which allow them to keep the lights on but defer payments. Check back with employees who cancelled travel plans. They may be eligible for a refund, which can save money or generate future credit. Additionally, evaluate your outsourcing costs to reduce day-to-day spend and determine if long-term projects need to be delayed. Small businesses should also re-evaluate their expense policies as remote workforces grow to ensure clear guidelines and control costs.
  • Automate financial processes. Paper-based expense and invoice processes become challenged when finance departments are decentralized and working from home. That is why remote work has accelerated many digital transformation initiatives. Automated solutions give management more control and allow businesses to receive and pay invoices regardless of where employees are located. Businesses that rely on paper-based systems must physically retrieve invoices in the mail, scan each invoice, stamp it, code it, secure approvals, print checks, then, get checks signed and mailed out. Such a process is nearly impossible with a remote workforce. By automating, businesses can improve productivity and help ensure payments are made in a timely manner. These solutions also provide visibility into how outstanding expense and invoices will impact the budget, which gives small businesses the ability to ensure every dollar is being spent wisely before payment happens.
  • Research state and federal support. Small businesses should research options for relief programs, grants, and additional resources. Many organizations and state and local governments provide guides to help entrepreneurs navigate funding and best practices for businesses under economic pressure. The SBA offers resources outlining new and ongoing financial programs for small businesses. It also gives guidance on obtaining government assistance. The federal government also offers the Paycheck Protection Program. Small businesses can increase the likelihood of securing a loan through the program by applying with multiple banks.
  • Explore financial options. Cash accessibility is key. Small businesses may be feeling anxious right now about finances but there is hope and there are options. Small businesses should negotiate to temporarily delay bills or go on minimum payments. Some banks and mortgage lenders are also making special accommodations for mortgage payments. Loan refinancing is another way to increase liquidity and help meet short-term financial needs. As part of its COVID-19 debt relief efforts, the SBA will pay six months of principal, interest, and fees that existing 7(a), 504, and Microloan borrowers hold. In addition, many large suppliers or vendors offer specialized grants and relief programs for small businesses.
  • Consider a short-term pivot in strategy or business model. Small businesses are proficient at scaling. A temporary shift in strategy may be the right approach when experiencing a decline in business. For retailers, now may be the time to consider adding gift card, curbside pick-up, or delivery options. Creativity with current resources and switching to high-demand products or services can help businesses tap into new revenue streams. Small business networks can serve as a sounding board for ideas, which could lead to new opportunities or partnerships. There are also local programs available to help small businesses make a pivot in their business strategy. For example, the Seattle Public Library is helping businesses find accurate market data that allows them to explore the viability of new services and products.

As entrepreneurs know, managing a business is managing change – especially with new challenges. To navigate a new normal, small business leaders must explore alternative ways of saving or making money to thrive in the evolving marketplace. The good news is, small businesses are flexible and adaptable, traits that will help them get through these trying times.

Val Blatt is SAP Concur Business Head and General Manager of Global SMB

Cash flow stock photo by StockEU/Shutterstock