Nothing is more pressing for many businesses right now than cash flow.
Even one-person businesses can apply for aid under the federal stimulus package, but many in the small business community are concerned that the money won’t make it to them quickly enough to keep them afloat. Alignable, a referral network, has determined that 37% of small businesses have less than 30 days’ worth of cash on hand.
“They don’t have much of a cash buffer,” says John Waldmann, founder and CEO of Homebase, a time-tracking and scheduling software for small businesses. “The clock has been ticking.”
With the rent due on April 1 for many businesses, that buffer will get smaller for many. “To me, what’s important is not just the size of the stimulus but the expediency,” Waldmann says. “We are going to enter a really difficult period over the next couple of weeks if businesses and workers continue without aid.”
If you’re hanging on by a thread at the moment, here are some strategies to deploy today to get cash flowing into your business.
Get caught up on invoicing this week. It’s easy to fall behind on paperwork in a crisis but getting invoices out to customers and collecting on them needs to be a top priority.
Fundbox, an alternative financing provider, recently found that it takes small businesses, on average, 28 days to get paid. In some industries, payments are slower. Professional services firms wait 36 days, on average, Fundbox found.
The clock doesn’t start ticking until you send an invoice. One routine worth adding to your week is to set aside 30 minutes or an hour every Friday to send out invoices for orders and projects that are completed. Don’t shut down for the week until you’ve sent out every invoice you can.
You may be able to borrow against your invoices later, once cash starts flowing again—but only if you actually have sent them to customers.
Send invoices at more frequent intervals. If you tend to do multiple projects throughout the month for certain clients, submit an invoice for each project as it’s completed, instead of waiting until you have completed several.
It’s time-consuming to log into your invoicing software repeatedly, but in a downturn, getting cash flowing quickly is key. A client who is short of cash may be able to pay a small invoice right away but have to save up to pay a larger one.
You’ll also detect signals that a client is running into cash flow challenges—and may not be able to pay you quickly or at all—if you invoice more frequently.
Offer creative solutions to your landlord. If you rent space outside of your home and can’t make rent, now is the time to suggest creative solutions with your landlord. “If you can’t get a rent deferment, ask your landlord if you can use some of your security deposit to offset part of your rent,” suggests Waldmann.
Not all landlords have deep pockets. A solution like this may be a lifeline for a small landlord who needs to keep cash coming in to pay a mortgage.
Keep your eye on local headlines about rents, leases and evictions. Some states are taking action to prevent tenants from being forced out during the crisis.
Support other small businesses. Do your best to pay your own vendors, contractors and freelancers on time.
Average daily revenue at small businesses has declined dramatically since the crisis. You can see what it looks like for selected industries on this dashboard the CRM firm Wompley created. Some firms that are at risk of closing may able to make it if they have some cash coming in.
A coalition of companies in the small business space— Actual. Agency, Alignable, Business.com, Fundbox, Gusto, Homebase, SmallBizDaily, Small Business Edge and Wompley — launched an awareness campaign today called #paytoday to encourage big companies and government to pay small businesses on time.
There’s no reason small businesses that are doing well can’t keep cash flowing to their vendors and suppliers, too. It’s a great way to pay it forward right now.