Managing cash flow during the pandemic

Kivanc Onan, Head of Payments & Financial Products Strategy of North America B2B at Alibaba Group, outlines four considerations for small businesses

As we navigate this exceptional global health and financial crisis, small businesses are particularly vulnerable to negative effects, with nonessential stores closed and foot traffic all but coming to a halt in those that do remain open. Most are reporting suffering, and a recent Goldman Sachs survey of 1,500 small businesses found that 51% have enough cash to operate for zero to three months. At press time, The Small Business Administration’s emergency paycheck protection lending program for small businesses had already run out of money, and had to be replenished by the Congress. In the short-term, the outlook varies for small businesses widely by industry, but it’s important to consider and prepare for recovery. Here are four suggestions.

#1 Think ahead and plan your cash flow for the first day that you are back in business

To assess how much your business has been affected so far and as a first step to creating a plan for pivoting, you’ll want to create a cash-flow forecast that takes into account the anticipated needs of your company, in the short- and long-terms. Most businesses, even if they survive past the pandemic, will continue to face cash flow and supply chain challenges during the first few months of re-opening. Therefore, it is essential to plan how much cash and credit you will need to re-start your business. Consider, what do you actually need now? What expenses can be cut and/or extended? What receivables can be accelerated or renegotiated? For example, bringing in USD 100 now might be better than USD 150 tomorrow, depending on your circumstances. There won’t be a simple or straightforward “end” to this pandemic, so planning ahead will allow you to better navigate the economic phases as this pandemic evolves.

#2 Spread goodwill along the way

A caring approach can make a difference to key suppliers and their families. Check in with them now to see how they’re doing, and be sensitive to their cash flow needs in the process. This will enhance communications and instil goodwill, which you may need to be reciprocated someday.

#3 Need Credit? Turn to suppliers first

Times are challenging, and you may find your business in need of additional credit, either now or when it’s time to jumpstart operations as we start to emerge from pandemic effects. Federal funding is limited, and alternate sources of credits all have pros and cons that you’ll need to weigh. As a first source, consider turning to your suppliers. Suppliers already have a financial stake in your business, so they may be more likely to extend credit with favourable terms and/or be flexible with partial or delayed payments, and they may overall be the most affordable option.

Also, look to take advantage of helpful new services that some companies are offering in response to the changing business landscape. For example, before the pandemic, buyers were almost always required to pay in cash upfront for orders. Now, in anticipation of the immense cash flow gap for small businesses in the post-COVID-19 world, Alibaba.com has launched a pilot program that enables 60-day payment term options for buyers who choose to purchase from one of Alibaba.com qualified sellers. Talk to the businesses you work with to stay on top of new services, offers, and terms that are being rolled out over the coming months.

#4 Avoid using personal credit cards for your business needs

While many small business owners rely on personal credit cards for a variety of good reasons – such as earning points, cashback, or other rewards – it’s imperative to carry a zero or manageable balance if you choose to do so. Why? Because credit card financing charges can accelerate rapidly, and you could be in serious debt before you know it.

We’re living through uncertain times, but one thing remains certain: cash is king. Small businesses that rationalize their cash flow will be best poised for success as we move forward.

About Kivanc Onan

Kivanc Onan leads Alibaba.com’s B2B Payments, Working Capital, Lending, and Protection Solutions in North America. With over two decades of leadership experience in the financial services industry, Kivanc specializes in engaging key stakeholders and translating complex business requirements into viable solutions driving growth and expansion across international markets. Prior to joining Alibaba, Kivanc was the Managing Director and General Manager of Turkey, Middle East and North Africa at PayPal. His former roles also include Director of Business Transformation and Strategy at American Express, and senior managerial positions at Deloitte Consulting, Kearney, and UBS.

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