Nothing is more urgent for many businesses right now than cash flow.
Even individual businesses can apply for help under the federal stimulus package, but many in the small business community fear that the money is not getting to them quickly enough to keep them afloat. Alignable, a referral network, has determined that 37% of small businesses have less than 30 days of cash on hand.
âThey don’t have a lot of cash reserve,â says John Waldmann, founder and CEO of Homebase, a time tracking and scheduling software for small businesses. âTime has turned. “
With the rent due April 1 for many businesses, that buffer will get smaller for many. âFor me, what’s important is not just the size of the stimulus, but the timeliness,â says Waldmann. “We’re going to enter a really tough time over the next two weeks if businesses and workers continue without help.”
If you’re hanging on by a thread right now, here are some strategies you can deploy today to generate cash flow in your business.
Ask about billing this week. It’s easy to fall behind on paperwork in a crisis, but sending invoices to customers and collecting them should be a top priority.
Fundbox, an alternative financing provider, recently discovered that it takes an average of 28 days for small businesses to get paid. In some industries, payments are slower. Professional service companies wait an average of 36 days, according to Fundbox.
The clock does not start until you send an invoice. One routine worth adding to your week is setting aside 30 minutes or an hour each Friday to send out invoices for completed orders and projects. Do not close the week until you have sent all possible invoices.
You may be able to borrow against your bills later, once the cash starts flowing again, but only if you have actually sent them to customers.
Send invoices at more frequent intervals. If you tend to complete multiple projects during the month for some clients, submit an invoice for each project as it is completed, rather than waiting until you have completed several.
It takes a long time to log into your billing software over and over, but in a downturn it’s critical to generate cash quickly. A customer who is short of cash may be able to pay a small bill right away but must save to pay a larger one.
You’ll also pick up signals that a customer is having cash flow issues – and may not be able to pay you quickly or at all – if you bill more frequently.
Offer creative solutions to your landlord. If you’re renting space outside of your home and can’t afford the rent, now is the time to come up with some creative solutions with your landlord. “If you can’t get a rent deferral, ask your landlord if you can use part of your security deposit to offset part of your rent, âsuggests Waldmann.
Not all owners have deep pockets. A solution like this can be a lifeline for a small homeowner who needs to keep cash to pay off a mortgage.
Keep an eye out for local headlines regarding rents, leases, and evictions. Some states are taking steps to prevent tenants from being evicted during the crisis.
Support other small businesses. Do your best to pay your own suppliers, contractors, and freelancers on time.
The average daily income of small businesses has declined significantly since the crisis. You can see what it looks like for the selected industries on this dashboard CRM firm Womply has created. Some businesses that are at risk of shutting down could do so if they have cash flow.
A coalition of businesses in the small business space â Actual. Agency, Alignable, Business.com, Fundbox, Gusto, Homebase, SmallBizDaily, Small Business Edge and Womply – launched an awareness campaign campaign today called #paytoday to encourage big business and government to pay small businesses on time.
There is no reason why small businesses that are doing well cannot continue to flow money to their vendors and suppliers. It’s a great way to pay it forward now.