Five Levers for Optimizing Your Cashflow in a Crisis

A crisis, whether economic, social or sanitary, is by nature a sudden occurrence capable of disrupting your company’s organization as well as its future. While there is surely no ideal approach, we have compiled a list of items to help you readjust your strategy and overcome such troubles.

There is a high probability of a crisis impacting your cashflow, which is why you must perform regular forecasts and keep a close watch over certain financial ratios. The main ratios to track involve your financial independence, your overall solvency, your profitability, as well as your working capital needs. These figures will help you stay on top of any gap between your revenues and the various expenses associated with your business.

To find out more about using financial ratios, you can read this article¹ (article in French) and consult an accountant for help determining the financial state of your company.

Should you run into difficulties, you can unlock funds via a number of levers:

1. Your suppliers

Negotiate payment deadlines;
Change suppliers (if you only have one supplier, payment deadline negotiations will be more legitimate).

2. Your customers and sales

Update your accounts records and send out reminders to concerned customers (if they are not affected by the crisis);
Identify any potential litigations, offer payment facilities to customers, optimize your General Terms of Sale, and apply for a discount credit² if necessary;
Automate your invoicing method;
Get protection against unpaid invoices via credit insurance and factoring³;
Diversify your customer portfolio;
Build customer loyalty;
Look for other levers for prospecting;
Reassess your margins and pricing;
Have customers pay a part of the services upon signing the quote, if possible.

3. Management of inventories and other assets

Consider reducing or improving how you manage your inventories with just-in-time⁴.
Consider a leaseback⁵;
Think about leasing rather than purchasing machines and/or materials;
Assess the possibility of transferring some of your assets (brand, office/space, patent, etc.).

4. Your business model

Give your business model a new direction: this could mean developing an online sales offering, delivery, additional services or products, an extension of your activity into other markets/countries, or new target customers. A few questions to consider:

Could another market be interested by your offering?
Could you target other categories of customers?
Does your value proposition respond to a specific issue?
What are your missions / values / areas of expertise?
Do you know your market?
What are your competitors doing in your country or other countries?

Make good use of digital technologies (a few examples⁶, and the factors behind the failure of digital strategies).⁷

To dig deeper, you can take a look at these articles: interview with an entrepreneur⁸ ; innovative business models⁹, inspiring examples¹⁰.

5. Bank loans and other sources of funding

Our tips for requesting a bank loan:

Present your short, medium and long term strategy;
Lay out the context with factual material (general economic crisis, loss of customers, payment litigations);
Present your past results (turnover, gross operating surplus, investments, cashflow, etc.) and your projections (relevant, realistic and reassuring);
Justify your loan request;
Reassure the bank regarding your project (customers, market study, order book, etc.) and its potential for growth;
Retrace all of your financial activities to be able to supply any requested information;
Prepare full documentation (business plan and financial plan).

You can read this article to learn more about bank interviews.¹¹

A number of other investment sources are available, such as microcredits¹², crowdfunding, business angels, and even venture capital funds.

Remember that a crisis can allow you to strengthen your team and reshape your activity.

To conclude, surround yourself with experts, don’t be shy to seek outside help and advice, and always keep your medium and long term entrepreneurial objectives in mind.

Learn more :

1 : this article / 2 : discount credit / 3 : factoring / 4 : with just-in-time. / 5 : leaseback / 6 : a few examples / 7 : the factors behind the failure of digital strategies / 8 : interview with an entrepreneur / 9 : innovative business models /10 : inspiring examples / 11 : bank interviews / 12 : microcredits