I operate a mid-sized retail and agricultural business, and I am already noticing fewer customers due to concerns about the virus. I was considering buying a piece of equipment and now I’m wondering if I should hold off? How do I manage cash flow when I’m concerned about the effect of reduced travel/walk-in traffic on my business?
Answer: The next two weeks and the next two months are going to be critical for many small businesses as we all figure out what the eventual impact will be. If you do not have large cash reserves (and most small businesses do not), you have got to manage your cash flow more carefully than you ever have. A few rules of thumb:
Now is not the time to buy new equipment. Delay any purchases that are not 110% necessary. If you are concerned about running out of cash before the end of the crisis, now would not be the time to buy a new wash and pack line or fencing.
Employees must be paid for hours worked, so you must have enough money in your accounts to make your payroll and the payroll taxes associated with that payroll. Do not borrow from that payroll account thinking you will pay it back before those taxes are due. That is a bet that you do not want to take.
Know your numbers. How much cash do you need to operate in a normal week? How much cash will you need if you reduce hours? How much cash do you need even if you are not open? Some businesses in hard-hit virus areas have made the conscious decision to close for a period of time to only incur the costs they have regardless of whether the business is actually operating (like leasing costs).
If you need to sit down and talk through your numbers to stay operational, contact us today at kcard@kcard.info or via phone at 859-550-3972.