How Can Businesses Manage Cash Efficiently to Navigate the Turbulent Times?

Even with a hoard of self-serving banking and payment technology at our disposal, there shall always be a need for cash. We are gradually inching towards a cashless society, and most of us now rely heavily on banking apps and payment gateways to go about our transactions. And now, with the pandemic toppling our lives and installing a new normal, cashless transactions have become the norm. However, the pandemic has also proved that cash shall always stay in vogue, no matter what. Technology might fail and impede our transactions during emergencies, and it is then cash that shall come to our rescue. Thus, the bottom line is that cash is the lifeblood of our society, and we cannot function without it.

That said, today, we shall discuss how important cash is for businesses of every scale and how they can manage the cash flow to navigate turbulent times. Businesses need to manage the inflow and outflow of their cash in the best ways possible to stay afloat even in a global crisis. A failure to do so shall lead them to shut down, and the pandemic stands as a testament to the said fact. Having said that, let us now move on to the next section of the article and learn all that we can about efficient cash management.

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Cash Management Tips for Businesses during the Pandemic:

There are two fundamental areas that you need to focus on to manage the cash flow of your business. First, you need to understand the amount of cash flowing into your business, and second, you need to analyze the amount of cash flowing out of your business. Once you get a picture of these two aspects, you shall be able to manage the cash flow of your business in its entirety. However, these are not the only things that you need to take care of. 

There are several other metrics and business processes that you need to pay attention to while analyzing the cash flow of your business. This is the basic model of cash management that businesses need to follow and factor in while they go about their cash forecasting task. Now though this might seem very simple at a cursory glance, these little tweaks can make a significant improvement to the cash flow of your business. Let us proceed to analyze the two main aspects of cash management in more details.

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The Inflow of Cash:

One of the main things that you need to worry about to manage your business’s cash effectively, especially during the pandemic, is the inflow of cash. As we mentioned earlier, cash is the lifeblood of any business, and it is important that businesses have a steady flow of cash to stay afloat even in grueling times. If you do not have a steady inflow of cash, your business shall be left with nothing in no time. This is because your business also has to manage its financial obligations like rent, utilities, paying off debts, payrolls and the like.

One way to see to it that you have a constant inflow of cash even amidst a crisis is by changing the ways you function. Most businesses have gone remote and started paying more attention to their online presence during the pandemic. This ensures that their customers are still able to purchase their goods and services without having to be physically present at the store.

Another way to ensure an inflow of cash is by offering lucrative discounts and pricing for goods and services. It is better to sell your goods and services at a lower margin to generate revenue than sit on them in the hope of making a profit later. This is, thus, yet another way to redefine your business model to navigate the tough times.

The Outflow of Cash:

Once you have managed the inflow of your business’s cash, the next step in the cash management process is taking care of the cash outflow. One of the biggest expenses that a company will ever have is labor. This is why several companies have laid off their employees in a bid to manage their expenses and stay afloat during the pandemic. Businesses could consider chalking out a plan to see where they can cut their expenses. Payrolls, rent, debts and certain types of investments are some essential areas. And there is no way that businesses can cut down on them.

One of the most important parts of your cash management strategy is managing your Accounts Payable. You should try and negotiate with your suppliers and check if they are fine with providing you concessions for unpaid purchases. Some suppliers even allow you to defer payments for unpaid purchases, and you must talk to them to avail the option, especially now that we are combating a virus and poor economy.

These are some of the ways in which you can manage your company’s cash outflow after having taking care of the inflow.

Wrapping Up:

There are a number of ways in which businesses can manage their cash. Cash management is an integral part of any business strategy, and now that we are in the middle of a pandemic, the need for cash management is more than ever. Therefore, the next time you sit down to chalk out a financial plan for your business, pay attention to these aforementioned points and navigate the pandemic with more confidence.

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