Image by Alan Cleaver from Pixabay
By Henry Brown
The national debt is exploding in the US and other countries as the result of the coronavirus pandemic. At the same time as the national debt grows, businesses of all sizes are likely face debt and difficulties of their own. Indeed, borrowing is necessary to maintain business operations. However, in the current fiscal context, the national economy is not able to sustain loans when profits are shrinking. When loans are not an option to maintain your business operations, what is the best way to tackle debts and stop them from gutting your profits and survival?
Keep on top of your cash flow
The cash flow is the lifeblood of every company, as it is generated by received income and becomes the payment for all business running costs. A negative cash flow occurs when you spend more money than you receive. Yet, managing your cash flow requires timely organization and planning. While annual income and payments may balance each other, your cash flow needs to focus on day-to-day operations. At this level, a negative cash flow can drive debt even if the annual transaction figure forecast didn’t highlight any financial risk. That’s precisely why real-time accounting, such as virtual bookkeeping services, is critical to your cash management. Indeed, organized bookkeeping lets you track essential operational expenses and projected income.
Don’t let taxes go unattended
While there are some tax exemptions and COVID-deductions available to support small businesses, there is no doubt that meeting IRS deadlines will remain challenging, even with financial support. Nevertheless, businesses need to be prepared to reach out to the IRS to handle tax problems. The US Internal Revenue Service understands more than ever the role that businesses have to play for the national recovery. Business owners can reach out to negotiate payment delays or discuss new payment plans. The bottom line: You’re less likely to experience tax-related stress if you stay in touch with the IRS.
Find a way to speed up unpaid customer invoices
As more and more companies are introducing new payment terms for their customers, it becomes difficult to manage cash flow. Your typical 30 days term has changed to a 60 or 90 days term. As a result, cash flow planning can become hard to forecast. Yet, working closely with invoice factoring companies that pay you on time instead of your customers can be a game-changer. The factor collects payment from the customers at a later point at the end of the new payment terms. Consequently, you don’t need to adjust your investment and expected expenses, as the income is maintained at the same frequency.
However, it’s fair to say that if the customers don’t pay the factoring company, you may be required to pay the factor back.
Remove unprofitable products
Are all products profitable? If you’ve had to transform your physical business into an online retail venture during the pandemic, monitoring online profitability can be a new phenomenon. It is fair to say that online profitability doesn’t match your profitability results in shop, as other costs need to be accounted for, such as marketing, shipping, and overall online processes. Is product B still profitable now that your retail is online? Google Analytics can let you review data to compare sales by product category, cost of goods sold by product category, and advertising cost by category. You can use the information to research and estimate your product online costs. Selling a product does not make it profitable!
Unlock your upselling potential
Maximizing each online transaction by unlocking new sales strategies can significantly boost your revenue. When you rely on online sales to ensure business survival, upselling and cross-selling strategies can make a great deal of difference. Ultimately, upselling is a sales technique that encourages customers to upgrade or buy a more expensive item. Cross-selling, on the other hand, focuses on selling additional products or services to complement the purchase. Upselling works best when it limits options to a couple of highly targeted recommendations that match your customers’ needs and interests. Experts recommend the rule of 25%, aka never upselling or cross-selling above 25% more than the original purchase.
When the pandemic is affecting financial stability, businesses need to get creative to ensure their survival. With fewer borrowing options, managing cash flows, negotiating payment reliefs, and providing reliable income sources can make business debts more manageable.
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Henry Brown is an online marketing executive. When he isn’t talking shop, he’s roaming the streets of London, uncovering the extra-ordinary in the ordinary.
