Entrepreneurs and small business leaders are finding it difficult to figure out how to manage their finances during the Covid-19 pandemic. There’s so much that needs to be done with the little resources that are available, and it can feel like you are navigating your way through a maze.
If you lack the experience to manage your finances in hard times, it can feel like a chore, and your lack of financial expertise can make the impact of the pandemic more pronounced on your business. You can alleviate the burden on yourself by hiring a CPA or accountant to help get your business finances in order. Not only that, but they will also be able to help when the time comes to pay taxes. After all, the process of tax filing for self-employed business owners can be meticulous to say the least, and the last thing you need is an audit due to some easily-avoidable mistake on your taxes.
There are tangible ways to manage your business’ finances in such a trying time as this. Here are some of the best tips for managing your business’s finances during the Covid-19 pandemic:
1. Reduce Cost
If you’re a small business owner, one of the first decisions you probably took at the beginning of the pandemic was to rethink your finances. Or you might have felt that the pandemic would soon phase off, and thus you kept your zero-based budget intact. But since the pandemic has not yet subsided, it is important that you shed off some of your costs as soon as possible. Another unique way to cut costs is for businesses to implement the use of solar panels. If your business already has one, then you’ll see how cost efficient they can be to save money that can be used elsewhere.
It is extremely important to do this, as you don’t want to find yourself in financial hardship. Here are steps you can take to cut down on costs:
List your variable and fixed costs
Depending on your industry and the business model you’re operating in, it’s much easier to cut down on variable costs than to do the same to fixed costs. For example, can you opt for a cheaper way to ship your products? Is it possible to reduce the sales commission of your personnel and find other ways to incentivize them? If possible, can you alter some fixed costs to variable costs?
Basically, try getting rid of any of the business costs that you can do without. This is the time to practice running your business at a lean cost.
2. Seek Help if You are Considering Chapter 7 or Chapter 13 Bankruptcy
Before you consider bankruptcy, you may consider using a debt payoff app to see whether you’re able to solve your business’ finance issues without debt relief.
Sometimes your business exists in an ecosystem where other businesses and individuals depend on the existence of your business to make their own profit. As such, don’t be shy to ask for help since preventing your business from insolvency works in their interest.
Try to explain where your business is right now and where it might be in some months to come. For example, if you can pay your rent this month, but it seems you’ll have some challenges doing so in two months’ time, then it’s best to explain this to your landlord.
If your debts are unsolvable, you may consider bankruptcy as an option of debt relief for your business. First, there’s Chapter 7 bankruptcy which you can estimate whether you qualify via a Chapter 7 means test calculator. If you do not qualify, there’s Chapter 13, which you can check plan payment via a Chapter 13 calculator.
3. Place priority on generating cash over turning a profit
The profit from your business is your total sales after the cost of producing your goods have been factored out. But making a profit does not necessarily equal a positive cash flow, which is what you need right now. You can reprioritize or adjust the actions you take to regenerate profit to improve the cash you generate.
Here are some tips to increase cash generated:
Give existing customers exclusive discounts
It’s less expensive to increase sales from existing customers compared to gaining new customers.
The difficulty is even more hardened with the raging pandemic as millions of breadwinners have lost their source of livelihood. Also, the incomes of most Americans have been greatly reduced, which will make them hesitant to spend on a new product or service.
Repackage your service or product for the consumer market
Suppose the majority of your product is sold in an office space or one that reaches your consumer by using middlemen. It’s best to task your marketers to come up with rebranding strategies and have an effective landing page. This can help ensure that your service/product reaches your target market directly.
Fill a niche in your neighborhood
It is important to find and try to deliver products that people genuinely need and have a use for. Platforms like Amazon have prioritized the delivery of household items in a move to reduce the number of people that visit a physical store. You might also want to sell household products that are highly demanded online in a bid to raise your income.
4. Empower your team
Business leaders often encourage their team with words like “we’re in this together” without taking actions that concretely reflect that to the team. As an entrepreneur/business owner, this is the period where you have to leave the comfort of your office space. It’s time to lead from the field.
Try to engage your employees on the goals and metrics of your business in this pandemic. It’s best to be transparent about your real business metrics, no matter how poor they may or may not be. If you open up on what your business needs to stay afloat, you’re giving them a reason to work hard.
In addition, doing this is helpful because it communicates the level of trust and respect you have for them.
In Summary
You want to make filing for bankruptcy your last resort. Managing a business during the Covid-19 pandemic period can be nerve-wracking. However, it is imperative that you keep your business afloat by managing your business finances if you plan to stay in business for long. This might prove difficult, but the tips we’ve given in this article can help.
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