5 Ways to Adapt Your Small Business Budget to Cope with COVID-19

As the COVID pandemic continues and economic uncertainty drags on, small business owners are having to think fiercely about their budget and assess the resources available to them. 

Without a doubt, we are living in a time when every penny moving in and out of your business counts. Even companies that were thriving before the pandemic are now searching for solutions to keep their business afloat. The biggest challenge is that no one knows how long the crisis will last or what the economic recovery from COVID-19 will look like.

As consumers and business owners alike continue to wait for the economy to reopen and some sense of normalcy to be restored, money management is a must. Take short-term, actionable budgeting steps so that you can help your business stay on track, until the economy is back to normal. 

Our team at Security Business Capital has put together 5 tips that will help you manage your new financial situation and adapt your budget for long-term financial success.

1.  Analyze the New Numbers

Whether your business had to close temporarily or was able to create ways to keep cash flow moving, your financial statements will likely look very different from what they did before COVID-19. Due to fluctuating cash flow over the last few months, your income has probably shifted dramatically. The first step is to take an honest look at your current financial situation and analyze the new numbers. Is there sufficient capital to pay all employees and continue to operate smoothly? Do you need to develop a more cost-effective marketing strategy? Are there ways you can better manage debt and expenses during this time? These are just a few of the important questions you should ask yourself as you reorganize your budget.

2. Restructure Your Finances

Once you have a clearer picture of your business’ finances, you will be able to restructure your budget to accommodate your needs during this crisis. If your business is one of the many that has experienced a drop in income, you will need to account for that in your budget. You will then need to find ways to bounce back from your negative cash flow position, such as cutting unnecessary costs and reducing expenses. The key to preserving your business’ long-term financial health and ensuring your team can get back on track post-coronavirus is to make sure your business’ money is being directed to the most productive areas right now.

3. Utilize Financial Forecasting

After addressing your business’ immediate financial needs, it is time to look to its future financial health. While it is impossible to know exactly what post-coronavirus will hold for your business, you can estimate your income, expenses and cash flow to support your company’s evolving needs. Utilizing financial forecasting allows you to develop projections for profit and loss statements, balance sheets and cash flow through analyzing past financial data and reports. Armed with this information, you can then create a new structure and fresh goals that will help your business grow after this crisis is over.

4. Set New Strategic Goals

Ensuring your business survives the economic crisis is not as straightforward as cutting costs, letting employees go or pivoting to new markets. If you have had to make drastic changes to your budget to navigate the coronavirus crisis, you will also need to adjust your financial goals and priorities. Ask yourself, “Does my restructured budget align with my current financial goals?” If the answer is no, it is time to identify what details really matter right now, (frequently) evaluate financial progress and then set new goals that will lead to a stronger future after COVID-19 has passed.

5. Build Up an Emergency Fund

It is safe to say that most business owners would not have thought to include a global pandemic in their planning before 2020. Even so, there are countless factors that could affect a small business’ success at any given time, making it incredibly important to always expect the unexpected. Moving forward, make it a priority to create a rainy day fund to ensure your business is in a more solid position if you are ever faced with another unexpected financial hit. Experts recommend setting aside anywhere between three months’ to a year’s worth of expenses. While the specific amount will depend on your business’ unique circumstances, access to this fund will ultimately provide the flexibility you need to manage the unexpected and refocus your business goals.

How to Solve COVID Cash Flow Problems

Are you struggling to manage your small business’ cash flow fluctuations? Do you need to create and build an emergency fund? Are you having a hard time meeting payroll? If so, there are invoice factoring solutions that can help you manage these challenges and meet your business’ ever-changing needs. Invoice factoring, also known as accounts receivable factoring, allows your business to partner with a factoring company to sell outstanding invoices and generate immediate capital. It also provides an opportunity to avoid incurring additional debt. Invoice factoring simply provides cash your business has already earned and is waiting to be paid. In addition, the amount available through factoring invoices is only limited by the number of invoices you wish to factor, providing your business with an unlimited source of funding that grows with your business. A premier invoice factoring company with years of experience, we understand the challenges of managing cash flow gaps and offers flexible cash flow solutions. Our invoice factoring services can transform your business’ cash flow, help you build a cushion of cash, effortlessly cover daily costs and maintain a strong foundation on which to grow. If you would like to learn more about our invoice factoring option (or other services, like PO financing), contact Security Business Capital for a free quote or consultation.