Entrepreneur Alert: 5 Things You Can Do RIGHT NOW To Conserve Cash
Conserving Cash is a Business Survival Skill
It’s a difficult time for most small businesses and entrepreneurs.
Fortunately, there’s a lot of help on the way through forgivable loans and disaster relief from the Small Business Administration. But business owners still need to be nimble to do what’s necessary to keep their companies afloat.
No one really knows what the long-term economic impact the coronavirus pandemic will have. While we hope life will return to (mostly) normal in a month or so, as a business owner, you need to be prepared for the possibility of a prolonged economic downturn.
And one of the best ways to prepare for an uncertain future is to start conserving cash now. The more liquidity you have on hand, the longer you can weather the storm and eventually coming out on the other side, ready to use those cash reserves for growth.
But before you look to lay off employees, keeping your employees on the payroll keeps your business eligible for forgivable loans in Congress’ recently passed stimulus package. Plus, it’ll be a lot harder to ramp your business back up down the road if you’ve sent your talent packing.
Rather than dropping staff, you need to get creative about how to conserve cash now. Here are our 5 tips for how to hold on to your money so you can make it through these tough times.
1. Defer Payments
This isn’t a long-term tip for saving money, but it does enable you to keep more cash in your bank account right now, which is critical.
There are a few possible avenues for getting accounts payable decreased for the time being:
Defer payments on credit or loans
- If you have debt in the form of bank loans or a line of credit, talk to the institutions who have extended the debt about decreasing or deferring your payments.
- They may be more open-minded than you might think, considering they’d like you to survive this crisis so you can continue making payments after it’s over.
Delay payments to vendors
- If you owe any vendors or suppliers for products or services rendered, reach out about pushing back the due date for payment.
- At the very least, try to secure a payment plan to stretch out repayment and keep more cash on hand for longer.
Hold off on payroll tax deposits
- Normally, you have to pay a 6.2% payroll tax for your company’s Social Security contribution, but now you can delay that payment.
- 50% of your 2020 payroll tax is due at the end of 2021, and the other 50% is due at the end of 2022.
2. Cut Spending
This may seem like an obvious piece of advice, but the areas where you can cut spending may be less obvious. Here are a few ideas:
Cancel or reduce the frequency of subscriptions and services
- Any services you subscribe to — like online marketing tools, design software, etc. should be reviewed to figure out what your team really needs to do their work and what you can live without, even if temporarily.
- Same goes for office cleaning, landscaping, etc.
Hold off on repairs, upgrades, construction
- If possible, put plans on hold for upgrades like re-doing the office bathroom, buying new computers, or expanding your warehouse.
If you have a physical office, warehouse or facility in operation, be diligent about conserving energy and water to save on utility bills.
Reduce or stop contributing to 401(k)s
- We normally don’t recommend this, because looking out for your employees should always be a top priority. But these are especially challenging times, and it may be necessary to cut back on certain benefits.
- You can do this under the government’s safe harbor rule — you just need to be sure to comply with the federal requirements.
3. Process Invoices Now
Perhaps you’re typically forgiving about when your customers and clients pay their bills. Now is not the time for a lax attitude about invoices.
Work to get all your billable accounts balanced ASAP so you can get more cash in your coffers. Even if some of your clients have time left before payment is due, you may ask them if they can pay sooner rather than later.
Do this professionally, and your customers will likely understand. But keep in mind that many of them may be facing financial hardship as well, so tread lightly.
4. Get Your Tax Refund ASAP
Owed a tax refund for 2019? File your taxes right now to get that money as soon as possible.
On the other hand, the IRS has pushed back the deadline for filing taxes from April 15 to July 15th, so if you owe taxes, hold off on filing until then.
5. Take Our Free Cash Management in a Crisis Program
Simple Startup is focused on helping entrepreneurs and small businesses build sustainable business models that have the potential to grow. In this time of economic downturn, sustainability is all about cash management.
That’s why we’ve designed a new, totally free business course especially for the current situation: Cash Management in a Crisis.
In this free online course, you’ll:
- Learn how to develop your own ongoing cash monitoring and analysis tool to look into the future of your cash flow and plot your business roadmap.
- Understand what happens to your business under different hypotheticals — a customer delays payment, sales don’t meet projects, etc.
- Develop mitigation strategies based on your financial data.
A real-world CFO will walk you step-by-step through the process of developing a cash management strategy to survive this crisis and come out the other side with a more efficient and sustainable business model.
All course participants also receive:
- Live video consultation with Simple Startup founder, Lorne Noble.
- Private access to a Facebook group of fellow classmates and Simple Startup’s financial experts, where you can ask questions, share tips, and find inspiration.
- Instructional documentation to help answer any questions you may have.
Need Help Staying Strong? Let’s Get Started.
Beyond all the pro tips you’ll get in our Cash Management in a Crisis Program, the best thing about it might just be that it’s absolutely free.
Simple Startup is waiving this course’s $299 fee to help business owners. For those who are able to donate, we’re asking participants to pay what they can, with all proceeds going to No Kid Hungry and Meals On Wheels.