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As we head into spring, all the normal activities have been put on pause, from Easter to spring shopping to getting the patio ready for summer BBQs. Business activities have also been put on hold for many small business owners. It’s a challenging and downright scary time for many businesses that can’t operate or have experienced reduced sales.

COVID-19 has had major impacts on everything from the health of our communities to the education of our children and everything in between. For many companies, there’s also been a sudden shift in finances. If you’re suddenly worried about cash flow, you’re not alone.

For businesses affected by the pandemic, read on to learn how to optimize your cash flow in these uncertain times.

Manage Your Cash Flow in Uncertain Times

Shift Your Focus to Short-Term Planning

The most stressful aspect of our current situation is that there is no definite end date. We don’t know how long we’ll need to continue physical distancing to prevent the spread of the virus.

The long-term cash flow plan that you created with your accountant in January has likely already been derailed in some way. That means shifting and pivoting alongside the situation. Since it’s impossible to say what the long-term effects are, it’s important to focus on the here and now when it comes to cash flow planning.

Short-term cash planning is always connected to a long-term plan. For now, your long-term plan is likely to hold out and make it through the duration of the pandemic, coming out on the other side ready to reinvest in growth strategies. To achieve this, you’ll want to look at what you’re spending vs bringing in on a weekly and monthly basis. Once you’ve looked at what your cash flow currently looks like, you can make shifts based on your current revenues and expenses (see the points below).

Here’s an example of a few cash flow categories you might be looking at in your analysis:

Cash flowing into the business:

  • Payments from customers
  • Investment returns
  • Sales of assets
  • Loans

Cash flowing out of the business:

  • Salaries
  • Operational expenses
  • Interest on loans
  • Purchases of assets
  • Production costs

If you’re worried about your cash flow and don’t know if you’ll be able to make it through the next few months, you can take our cash flow assessment quiz to see where you stand and what your next steps are. For planning and strategies, you can reach out to us at Schwan & Associates any time, or to your Edmonton accountant.

Clear Your Accounts Receivable

If you have outstanding invoices and haven’t received payments yet, now is the time to double down on your accounts receivable. Schedule a time to send out invoice reminders each week and be diligent in following up with customers. In some cases, you may want to reach out directly to customers to discuss payment plans or instalments.

List Your Business Expenses and Prioritize Them

With short-term planning, cutting out unnecessary expenses is critical. In times where cash flow is strong, you may have added expenses that aren’t basic necessities. Now is the time to look at what you’ll need to make it through the next few months,

However, be sure not to cut out the essential services you’ll need for long-term success. There are some expenses you may want to seriously consider continuing, including:

  • Financial planning & support, such as financial advisors and accountants (learn more about how much accounting should cost in the next blog)
  • Marketing services

In some cases, it might not be about cutting expenses necessarily, but rearranging them. Look at items like your phone bills, utilities, insurance policies, and other expenses and see if you can optimize them by bundling, using discounts, or renegotiating contracts.

Take Advantage of Benefits & Support

Although it’s not in effect yet (and may take up to 6 weeks to fully implement), the Canada Emergency Wage Subsidy (CEWS) will subsidize eligible employers for up to 75% of weekly wages. It’s meant for organizations that have lost 30% of their revenue or more.

There’s a whole host of other benefits and supports for small businesses and entrepreneurs from federal, provincial, and municipal governments.

A great resource for businesses in Edmonton is the Chamber of Commerce website, which has information for business owners, as well as an Edmonton support network for organizations like Kids Kottage and the Edmonton Food Bank that are in need of specific items.

Talk to Your Edmonton Accountant to Learn Your Key Metrics

Now more than ever, small business owners need to know the key numbers to focus on and how to improve them in the short-term to make it through the next 6-12 months. Depending on your accounting software, all of these metrics will already be available to you. To learn which metrics you should be keeping an eye on and which actions you can take, get in touch with your accountant and ask for help. CPAs are here to help you through these hard times.

Jeff Schwan

Jeff established Schwan & Associates CPA to bring unique “cloud-based” accounting services to small and medium-sized Edmonton businesses. Inspired by the quality time spent with his family, Jeff’s goal is to put more time back in the hands of the busy entrepreneurs who strengthen Edmonton’s business community. With 10+ years of experience in diverse management roles, Jeff has acquired a strong set of leadership and mentoring skills. He is, and always has been, an educator at heart. He knows the value of spreading knowledge, investing in people, and continually learning.

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