Managing Cash Flow in Uncertain Times
As the economic impact of COVID-19 continues to rapidly expand, many small businesses are already feeling the stress of this impact on cash flow. Planning is important in any economic environment - but more so when future revenue streams are unpredictable. 

It is important to both assess and manage your businesses’ cash flow position and to plan for potential loss of revenue. Below, we have compiled a list of tips to help keep you with your strategy.


Minimize Cash Outflow
In order to preserve as much money as possible within the business, start by determining where you have the opportunity to reduce your expenses.
  • If you have existing bank loan(s), reach out to your banker to explore what options may be available to you for temporary relief. Potential relief may include interest-only loan payments for the short term, or extending the term of the loan to reduce monthly payments.
  • If you have any debt through a private lender(s), like family or friends, reach out to discuss potential available relief. Private lenders may have more flexibility than a bank to defer payments short term, lower an interest rate, etc.
  • If you are renting space, reach out to your landlord to request a short-term rent deferral or a temporary reduction of rental costs.
  • Carefully consider your staffing plan. Potential options include:
  • Reducing business hours in order to decrease payroll costs
  • Staffing layoffs. These are really difficult decisions, but prolonging these difficult decisions can make recovery more challenging. Be sure you understand unemployment laws as you are evaluating these decisions.
  • Carefully review your past monthly expenditures, and project those for the upcoming few months. Note mission-critical expenditures, and defer or eliminate those that are not.  
  • Reduce inventory, including selling off current inventory - even at a discounted rate - and/or cancelling orders for inventory that has not yet been received


Grow Cash Availability
  • Consider opening a line of credit with a bank if you don’t have one. Even if you do not plan to use this credit, it can provide you with additional options in the future. Credit cards are also a potential short term tool, but be mindful of the high interest rates associated with this action.
  • Explore your ability to enter a short term loan arrangement with friends or family. Carefully document the terms of any such agreement, and make sure all parties sign off on those terms.
  • Explore creative options for keeping your revenue flowing, such as offering gift cards and prepayments for products/services to be delivered at a later date. Strive to keep your customers engaged via appropriate communication during this time, and let them know explicitly how they can best support your business.
  • Check your collections policies and procedures, and consider your ability to provide flexible payment terms. Your customers are experiencing the same financial stresses and may not have the ability to pay you as quickly as in the past. Offering terms, if you are able, may be preferable than not getting paid at all.
  • Explore business disaster loan options that are being offered through the SBA and the WEDC.


Continue Your Business-Planning Process
One of the difficulties of the COVID-19 crisis is the uncertainty associated with how long it will last. At this point, one of the most helpful things you can do for your business is to be aware of where you stand financially. After you have minimized expenditures and worked to grow your cash on hand, take some time to make some projections. What would your financials look like if you did not bring in income for 2 weeks? 4 weeks? Longer?

While this exercise is stressful to consider, it can help you make informed decisions about how best to move forward.


SBDC Remains Open Online
The UW-Madison SBDC remains open for business and is here to serve you (remotely at this time). If you are an existing SBDC consulting client and would like to discuss cash flow management with your counselor, please reach out to them directly to schedule a call. If you are not currently a consulting client and would like to speak with a counselor, please complete the on-line request for counseling , and you will be contacted via phone or e-mail by our office. 
The Wisconsin SBDC Network is a proud part of the  Institute for Business & Entrepreneurship  in the  University of Wisconsin System . It is funded in part through a Cooperative Agreement with the  U.S. Small Business Administration.