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Protect your cash flow

As communities across the U.S. lift coronavirus-related restrictions, there’s growing optimism that better days are ahead for American businesses. Cash flow will continue to be critical during this time. Companies that manage cash effectively will be in a better position to take advantage of an economic upswing.

“Cash flow helps you plan for the future,” says Nayo Carter-Gray, the founder and CEO of 1st Step Accounting. Companies need cash right now to continue operating — paying employees, ordering supplies and more. A strong cash position can also spark growth by allowing you to hire employees, buy equipment and make other investments when the time is right.

Together with Sherrell T. Martin of Nitram Financial Solutions, Carter-Gray participated in a recent Chase Chats Webcast presented in partnership with Intuit®, the maker of QuickBooks®. The two accounting experts offered seven tips for how businesses can effectively manage cash flow.

1. Shorten your time horizons.

In normal times, an established business might develop a cash-flow plan that looks ahead 12–18 months. Martin recommends shrinking that time horizon during times of uncertainty. “Currently we’re doing three- to six-month plans, and even for some clients we’re doing as little as 30-day plans.”

2. Project your cash flow.

You can develop a cash-flow projection in four basic steps:

  1. Download your balance sheet and profit and loss statement from your accounting software.
  2. Look at the most recent months, and annualize the numbers for future months.
  3. Look at your projected revenue, and make adjustments based on what you know right now.
  4. Adjust your expenses to current realities.

Once you have this data, you can run scenarios to better understand how to keep your business afloat. If you’ve never developed a cash-flow projection or need a refresher, Intuit provides an easy template.

3. Audit your costs.

The suddenness of the COVID-19 shutdown meant that a lot of businesses had to cut expenses quickly. Now is a good time to step back and look more holistically at your costs. Are there tasks that you can outsource or automate? Are there redundancies in administrative costs that you can cut? Are there applications that can free up time, such as a receipt management system?

4. Look for revenue potential.

Many companies have found creative ways to keep bringing in revenue in our new environment. Event companies have created virtual experiences, retailers have established digital stores and even hair stylists are offering online consulting. Carter-Gray suggests that retailers also consider established online marketplaces such as Amazon and eBay. And don’t overlook stale inventory. Even if you have to discount some products, the opportunity to maintain sales volume could keep your business from running out of cash.

5. Stretch your dollars.

If revenue is coming in slowly, cash should leave your accounts slowly. This doesn’t mean you don’t pay vendors, but you may want to negotiate a partial payment or offer a timeline for when you’ll be able to pay. Before re-negotiating any payment arrangements, check with a professional to help understand the implications. The CARES Act also has provisions that can help you stretch your dollars by deferring tax payments such as Social Security taxes.

For ongoing expenses that you can’t cut or delay, consider using a business credit card that offers points or cash back, such as a Chase Ink Business Unlimited® card. Always track credit card expenses as carefully as you would any other expenses so that you can plug them into your cash-flow analysis.  

6. Reach out to your community.

“Don’t be afraid to ask for help,” says Carter-Gray. People understand that businesses are struggling right now. Give them an opportunity to make a difference. Businesses with a loyal clientele can sell gift cards or take advance orders to bring in cash. Many small businesses have also turned to family, friends and neighbors via GoFundMe.

7. Keep calm and carry on.

“Don’t panic,” says Martin. “Make the projections and use the information to make better business decisions.” Carter-Gray adds that it’s important not to overlook small details: “Every dollar helps.”
 

Nayo Carter-Gray is the owner and founder of 1st Step Accounting, LLC. A self-proclaimed techie, Carter-Gray decided a virtual accounting practice was the best way to experience her love of travel and still help small-business owners all across the U.S. reduce the stress of managing their disorganized financial systems. She is an enrolled agent and a QuickBooks Online Advanced Certified ProAdvisor, was named one of Hubdoc’s Top 50 Cloud Accountants of 2017 and 2018 (North America), was handpicked to sit on the 2018–2019 Intuit Accountant Council and was recently named a top 100 must-follow tax Twitter account by Forbes and one of the Top 50 Women in Accounting by Practice Ignition.

Sherrell T. Martin is an award-winning financial consultant and the founder and CEO of Nitram Financial Solutions. Through financial management consulting and outsourced accounting and bookkeeping support, she assists established small-business owners with managing the financial health of their businesses so that they can find money leaks, increase cash flow and maximize profits. Martin has worked with many industries and is an Advanced Certified QuickBooks ProAdvisor and a member of the Intuit Trainer/Writer Network.

For informational/educational purposes only: The views expressed in this article may differ from those of other employees and departments of JPMorgan Chase & Co. Views and strategies described may not be appropriate for everyone, and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and objectives before making any decisions, and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results.

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