While the U.S. economy grounded to a halt over the last couple of months, many business owners depleted their cash and working capital to a point where they’re facing liquidity issues. This isn’t entirely surprising because many entrepreneurs had to spend cash to keep their life’s work in the black. But entering into the post-COVID world with little liquid is a scary proposition, one that some business owners aren’t prepared to tackle.
Luckily, we can offer you several pieces of advice and best practices that will help increase your liquidity today. So if you’re nervous about how your business is going to maintain its economic stability in the post-COVID era, check out our blog below for some pointers.
4 Tips for Maintaining the Stability & Liquidity of Your Business
- Assess Your Liquid Position – First, what’s most important is to assess your cash flow at the current moment. How much liquid does your business have? Are you able to use all of it or are their restrictions on portions of it? What is your liquidity headroom? You should ask and answer all of these questions to give you a comprehensive idea of how to increase your cash flow and maintain what liquid you have in reserves.
- Forecast Various Cash Flow Scenarios – If the COVID pandemic taught us one thing it’s that you never know what will happen. So take some time to forecast how much cash you’ll need for at least the next 3-6 months. Then ask yourself some hard questions: What will happen to your cash flow if you see a drop in sales in the next quarter? What if your clients aren’t able to pay off the full balance of their bills on time? Mapping out various plausible scenarios before developing a plan of action is crucial to your liquid success.
- Maximize Your Inflow – Making sure that you have money coming in regularly is the best way to maintain your cash reserves. Maybe you’re thinking that this is an obvious point to make. Fair enough. But are you proactively maximizing your inflow at this particular moment? Here are some ways you can do just that: Have management prioritize billings and collections. Develop a plan for collecting all outstanding bills. Enforce payment guidelines. And take advantage of invoice factoring.
- Stay on Top of Resources Available to You – If you haven’t already, make sure that you’re keeping a detailed account of how much money, inventory, and employees you’ve lost because of COVID-19. The government has already passed several pieces of legislation meant to kick start the economy, and there will probably be more in the future. So keep your eyes and ears open for federal, state, or local opportunities that might be coming your way.