Cash Flow Management During the COVID-19 Pandemic

By Jasmina Mujkic - Apr 22 2020

The COVID-19 pandemic is impacting everyone. Even those fortunate enough to avoid contracting the virus are faced with an economic crisis, unlike anything most of us have ever seen. Small and medium businesses have been hit especially hard, and many are fighting to survive.

Many businesses have been forced to close, scale back, or change their offerings. Customers are staying at home and avoiding spending.

Taking care of your employees and preparing your business to come out on the other side of this requires careful cash flow management in this unprecedented time. There are a lot of things small and medium businesses can do right now to mitigate the impact of the Coronavirus on their business. Start with these cash flow management tips.

Focus on the Cash Conversion Cycle

The cash conversion cycle is a three-part cycle:

  • Your inventory and how long it will take to sell it
  • Sales and how long it will take to collect payment from those sales
  • How much is owed to other companies (supplies, utilities, etc) and how long it will take you to pay them

The cash conversion cycle is a great measure to track how your working capital is changing relative to the state of your business. Typically, your focus is on managing inventory and sales. Paying your suppliers and partners is something that happens naturally and easily when your business is making money and you are getting paid. During difficult times, you need to bring extra focus to your expenses and carefully consider the entire cycle. Your cash conversion cycle may become longer due to the effect of COVID-19. It’s important to communicate with your suppliers and partners to enter into any necessary payment arrangements while managing your bottom line.

Consider Alternative Funding Options—Like Cash Flow Finance

Cash flow finance with Key Factors is a flexible alternative to improving your cash flow. Outstanding invoices represent money you have already earned, and it would certainly come in handy right now.

Instead of waiting up to 90 days for your customers to pay your invoices, you can send us copies of the invoices you want to be funded and release immediate cash from your invoices.

How Key Factors cash flow finance works:

  • Send copies of invoices you would like funded to Key Factors
  • Key Factors will verify your invoices and fund up to 80 percent of the invoice value in as little as 4 hours
  • The remaining 20% less any accrued fees are credited to you when your customer pays us

Why Key Factors Cash Flow Finance

Since 1989 we have been helping to relieve cash flow pressures suffered by Australian businesses from slow payments, rapid growth, the GFC, ATO debts, and the lack of support provided by their banks.

Our goal is to support our clients at every stage of their business, and we do it with flexibility, top-notch customer service, and a genuine desire to see Australian businesses succeed. Our goal hasn’t changed, nor have the features that set us apart:

We Don’t Just Fund Your Invoices, We Also Help You Collect Them

Funding of your invoices can be in as quick as 4 hours, and we will work with you to help follow up on payments. It is pivotal to limit your operating expenses at the moment, so it is good to know you can rely on us to help with your collection activities on factored invoices.

We Help Mitigate Your Risks

Understanding and limiting your customer’s risk is part of our business DNA. With over 30 years of experience, while using the latest risks-management technology, you can rely on us to provide advice on your debtors’ creditworthiness. We also conduct and provide free credit reports to our customers to help them assess whether they should extend credit to a customer.

Less Admin, More Sales

Think of us as an extension of your accounts team. We monitor your debtors and their accounts, help follow up on payments, and send statements of accounts to your customers. We don’t charge a monthly admin fee or annual fees. It is all part of the included benefits. This allows you to keep money flowing through the business while gaining access to efficient operational support.

Apply for a Cash Flow Boost From the Government

To help small businesses retain employees, pay their rent, and keep up with their bills, the ATO is providing tax-free cash flow boosts of $20,000-100,000 to eligible businesses starting on 28 April 2020. You’ll receive it via your activity statement system as credits when you lodge your Business Activity Statements.

Eligibility: You will be eligible to receive the cash flow boost if you are a small or medium business entity, including nonprofit organisations, sole traders, partnership, company, or trust that:

  • Is active and held an ABN on 12 March 2020
  • Has an aggregated annual turnover under $50 million
  • You made payments to employees subject to withholding

For complete details on the program refer to the cash flow assistance for businesses fact sheet.

Assess Your Variable Costs

Every business has areas where they can cut back, especially in times like these. Some of it may be obvious-for example, you can eliminate most or all of your travel, which is currently a matter of safety as well as cost-savings. You’ve probably already put a temporary freeze on hiring or training. Focusing on re-marketing to existing customers is a great way to reduce advertising costs. Connecting with fellow small businesses to brainstorm ways to cross-promote each other also has cost-saving benefits. For many small to medium businesses, a combination of these strategies and others will help pave the way forward. If improving your cash flow is one of your strategies to get through COVID-19, contact us. With over 30 years of experience, we have established ourselves as Australia’s leading independently owned debtor finance company. We have worked with manufacturing, wholesale, recruitment, labour-hire, mining, IT, business services, transport, logistics, and many other businesses all over Australia to help them maintain steady cash flow. We can do the same for you, especially now.

Apply online, fill out an enquiry form, or call us on 1300 884 100 now to find out more.


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