Have you noticed that all major economic crises are man-made. The crash of 1929, two World Wars, the 2008 mortgage crisis and even Brexit. Until now they could have been predicted, but Covid-19, or the Coronavirus, appears to have been made by nature, well, at least by snakes!
It is a crisis that has suddenly hit us and many of us are unprepared, so how do you get through it, especially when sales start dropping. The problem is that because of its nature we can’t look back and say what we should have done, as I don’t think anyone could have planned for it.
In any financial crisis, as with this is one, the weakest go to the wall first, as we have already seen with Flybe. They were weak before this happened and this tripped them over the edge into redundancy.
Therefore, what are the things you should be doing right now to make certain you survive.
·Create a cash flow chart for the next 6 months based on a reduction of 50% in your sales.
·Identify the point at which you will run out of money.
Now do the Lindberg Walk (https://www.think-cash.co.uk/post/can-you-do-the-lindbergh-walk) by putting your expenses into two columns:
Your Target ones.
Your Comfort ones.
You may have always done, this but do it this way as you will become even more critical of your expenses.
Most businesses are run on a shoestring, which means you need to take further actions.
Such as reducing your payment terms from 30 to 14 days and then follow the rules of credit management as shown in our YouTube video “Rules of Credit Management” https://www.youtube.com/watch?v=dAHBk9Gc7Sk&t=5s. Keep to this discipline and your money will come in quicker. It may not come in in 14 days but quicker than it used to.
Now to your creditors, they need to be extended. This is delicate, if you get it wrong, they will not support you. Be brave, ring them, explain you have a problem, you are confident in getting through it, but in the meantime, you will send them a small payment each week. Make certain you do send the payments and you will be surprised how many will support you. This is because they are in the same position as you and therefore are much happier to see some money coming in, while knowing you haven’t run away.
Be brave, do these things and you will be surprised, and you should get through
If you need help, that's what we do at Think Cash!
Tony Dalton is a well respected business Mentor covering the Midlands and Warwickshire. Click here for more information on Tony and "Think Cash!"