5 Ways Businesses Can Manage Cash Flow Challenges in a Stressed Economy – D Magazine

While the world is beginning to return to a sense of normalcy as the effects of the pandemic wane, the business world still faces a plethora of challenges. Business owners who worked tirelessly to survive the impacts of the pandemic are now facing rising interest rates, inflation, and more.
As we wade through these challenges, businesses may need to prepare for a possible economic downturn or recession as the Federal Reserve continues to work to combat inflation.
Below are some key financial considerations for businesses as we operate in a stressed economy.
Cash and liquidity are king in today’s business world. Many business owners focused much of spring 2022 on rising interest rates, supply chain constraints and taking stock of liquidity. Now is the time to focus on adjusting expenses and processes to generate and protect business cash flow.
Business profits are not the same as cash flow, so don’t look to your profit/loss statements to determine if there’s enough cash to cover you. Dig into the details of your business’s financial statements to see what you have in cash reserves each month, and what your income/payment cycle looks like.
Your cash flow projections should tell you the cash you have right now, and a projection for what your cash will likely be in six months. If you’re in an industry with long payment cycles, like freight or leasing companies, you will likely need to forecast more aggressively to truly see what your business cash flow and income amount to.
With talk of a recession, uncertainty rules the day, which means it’s critical to maintain enough cash to handle day-to-day operations. Protecting your cash may be just as important as generating it as we look at a potentially longer recovery timeline.
Some strategies to consider include:
Budget cuts. Shudder. No one likes them, but nearly all businesses need to implement them at some point. If you haven’t revisited your 2022 budget, you are overdue. What may have looked like a perfectly reasonable allocation in December 2021 is likely no longer on the docket for 2022. Conversely, funds you may have set aside for a new project could have been absorbed into expenses related to market changes, economic pressures, and global events.
One tip to consider: Don’t start slashing willy-nilly. Being strategic about budget cuts now can help your business recover when the market picks back up.
Once you have a handle on your current business cash flow, you can turn to generating more income. While it’s a tough market for many industries, it’s important to stay nimble, highly aware of customer needs, and strategic in your decisions.
Even if your business is struggling to capture new clients, there may be ways to optimize sales and access cash.
As you assess your liquidity and consider strategies for the remainder of 2022, now is the time to be in touch with your business banker. Your banking partner can help you manage market uncertainty and help you build contingency plans for liquidity, debt management, accounts receivable tactics and more.
Connect with Adam McDiarmid, UMB president of small to medium businesses, at [email protected]. If you are interested in learning more about how UMB can help your business as a financial partner, visit our website.
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This article was autogenerated from a news feed from CDO TIMES selected high quality news and research sources. There was no editorial review conducted beyond that by CDO TIMES staff. Need help with any of the topics in our articles? Schedule your free CDO TIMES Tech Navigator call today to stay ahead of the curve and gain insider advantages to propel your business!