Partner Post: Lessons Learned While Being Stuck in a Pandemic

Today, my clients are facing multiple challenges and each different, regarding their situation as  we try to coach them back to financial health and stability. Today, I want to share with you what my business has learned thus far working with our clients regarding cash flow during this pandemic. 

1). Understand your Baseline:

In a small business, family lifestyle and business are intermingled. It is extremely important to know the dollar amount required to support your family. This money goes into an owner “salary bucket,” this threshold needs to be understood and followed by you or whoever manages your books. This is the baseline for all the remaining decisions. If you cannot put food on the table, provide shelter for your family, and keep the lights on at home; you will more than likely make irrational, bad decisions for your business. 

2). Establish Banking Relationships:

Build a good relationship with a banker, they do not need to be your best friend, but they need to know you and your business. Smaller regional banks are much easier to build relationships with. At a time like this, these smaller regional banks are picking up their phones. These relationships are so important as they may have a majority your money. Banks can charge you for all your insufficient funds on automatic withdraws, when you have no money coming into the bank. The bank has discretion on how to treat each client, they could choose to alert, refund, and stop charges. Some clients had thousands of dollars of bank fees during the month of March, we were able to remove the charges via a banking realtionship. Further, what if you have been approved the PPP loan and want to understand exactly what will be forgiven and how do you documentation, who can you turn to? What if you want to open new business and all banking is now done on the phone, who do you talk to open a new business account? Relationships are important.

3). Line of Credit (LOC):

When or if your business is healthy, establish a line of credit. If you do not touch this line of credit great, but have access to outside funds for severe circumstances. 

4). Fixed Costs:

Know the fixed costs of your business and put a few months of the following in a “rainy day bucket.” When setting up your “rainy day bucket” it is important that it is a balanced equation as you want to invest in your company and employees but do not want to be taxed on a cash balance. No one predicted a zero-revenue month, but it represents a worst-case scenario. The following costs should be considered, if not it is a huge risk to your company. 

• Employees – Figure out who are your “A players “ and their monthly salary, these are members of your team that make your business thrive and will easily find another job and make another company better if you lose them.  Make sure you have enough to pay them when times get rough. 
• Fixed Critical Expenses – Rent, insurance, utilities, loan payments for operational equipment 
• Accounts Receivable – Build ability to get payment for services immediately and partial payment as work is being completed.
• Accounts Payable – Focus on critical suppliers and vendors, know who they are and build a relationship. If you cannot pay in full, pay in installments to keep the relationship on good standing and terms. 

5). Join Networks and industry Blogs:

It is extremely important to know and understand what your industry peers are doing. These networks and blogs can help you identify and understand: if you are off track, trends, latest events, latest regulations and what successful companies are doing. At Bookkeeping It Simple we provide benchmarking information, where we take in company data from the same industry and coach business owners on how to replicate good business decisions. Freight Broker Live is a great way to get connected. 

In any business, relationships are much stronger than contracts. In the long run, the stronger your network and business relationships, the more profitable you will be. 

6). Outsource:

Focus on your strengths. If you are good at operations but not at finance, focus on streamlining your operations and outsource your finances. If you are a total introvert and do not like talking to others, outsource communication and sales. Common best practice is to focus on your strengths and surround yourself with experts in other areas that you find more difficult. You and your business will be thriving before you know it.