This is a stressful moment for most of the businesses where everyone is locked down in their home. Small scale shopkeepers to large manufacturing giants have seen falling demand in business. Don’t count on recovery until mid-2021, and the correction won’t happen overnight.
For businesses to sustain at this moment having a cash reserve for 18–24 months is very important at this stage, here we come with the top 10 things that businesses can do to safeguard this business from the effect of covid 19.
The first step is to cut down your monthly expenses as much as possible, imagine yourself at day zero and plan your expenses. Below are the few tips to cut down on cost.
Call your landlord and negotiate a lower monthly rent. Sign a longer-term lease in exchange for the lower rent if you have to or opt for coworking spaces, get the seats for only those people who actually need a space like, finance & operations, rest operates from home. Rent could be a big chunk of expense and if possible, to cut, go ahead a do it, It will definitely help you safe a good money
Consider all your utilities like water, power, Internet, and phones. Call your vendors’ competitors and ask for deals & discounts. Let them know you’re willing to switch vendors if they can give you a better deal, Do a hard negotiation. Now once you get a good deal give an opportunity to your present vendor to match the offer, so you don’t actually have to go through the trouble of switching
Call your vendors and get better terms. For example, you may be able to get 45-day terms instead of 30-day terms. Having cash on hand for an extra 15 days may be crucial in your survival.
Look for options where cash could be kept in the bank for a longer time, look for credit cards who gives 45–60 days interest-free repayment option or make payments via postdated cheque this is one of the golden ways to get credit from vendor. A PDC gives a sense of security to vendor on payment as sooner or later it has to reflect to their account and it adds few more additional days to enjoy cash in your bank.
Recently banks have waved of the moratorium, amid lockdowns over the Coronavirus outbreak, the RBI announced a three-month moratorium on payment of EMIs on all term loans that were outstanding on March 1.
This could be help full for some businesses, here is the link to calculate the EMI if you are going to use this scheme.
Cash inflow is as important as cash outflow, having a right ratio of inflow vs outflow is the way to deal it:
Get your cash as soon as possible, offer an additional discount if possible for paying you early. Stop giving your customer free credit at the cost of your business, remember you are offering credit based on the relation with your customer but that doesn’t mean you should bleed.
At times being aggressive in collection works and if needed do it, but remember you should be friendly & courteous at the same time.
It always difficult to get a new customer than to maintain an old one. Calculate the acquisition cost vs retention cost and place your strategy accordingly. However, most of the time ROI for retention is much bigger then ROI for the new acquisition.
Do deep sell or cross-sell your product and try to maximize the revenue. Sit with your team and have a deep dive into your sales funnel and do it on a regular basis.
The business environment in a recession is very different from the good years and positioning the right supply chain is what matters the most. Consumers spend differently, which forces you to adjust accordingly. Here are tips for making those adjustments
Is your cash is tied up in inventory, are their possibilities to fee up the inventory, is it possible to develop a zero inventory model. You have to seriously look into your product line can check if any possibility to liquidate the worst performing portfolios. This can make a big difference in your cash scenario.
A clear understanding of your supply chain will help to expose any potential vulnerabilities and there are ways to reduce risk in supply chain & optimize it for better results. If the sourcing & logistics is done right there is lot of cash can be added into the business.
Not only supply chain but cloud based solutions can play a great role to fight back impact of COVID 19, having a digital ecosystem for supply chain can add greater visibility in the planning & can cut a huge man-hour cost in operating the chain.
Boxnbiz is one of the digital forwarding company which brings visibility in supply chain for organizations. From price discovery for international freight to e-documentation or e-payments, it enables shippers to have remote access to their supply chain.
People are the most important part of running any business but at time they can be a huge cost as well, keeping them productive at hard times becomes a challenge for most businesses but those who survive it are going to win this:
Layoffs are heartbreaking but at times it’s the only way to survive. So once you cut it deep i.e the bigger cost with low output, and do it sooner. Taking too much time may make your situation worst.
Be hundred percent transparent with your employees, show them the numbers and tell them you are going through a hard time. Sit & plan how all of you together come out of it.
Having the team aligned & clearly communicated is very important during a hard times.