Tips to Managing Cash Flow in a Downturn

  June 11, 2020

  Read Time: 3 MIN 30 SEC

Nothing reinforces the importance of cash flow quite like a sudden disruption in demand. In a period of economic decline, managing cash flows effectively can be the difference between stability and security. Here are a few tips on cash flow management in challenging times:

Use Incentives to Lock Down Sales in Process
Pending sales are often abandoned during a sudden onset market disruption. But those near-term revenues are critical cash flow support when you need it most. To secure those sales, consider using guarantees, warranties, or even return policies. These incentives offer a kind of insurance against further decline and help your customers move forward with confidence when confidence is scarce.

Reduce Inventory Levels Quickly
It can take as many as 120 days in some businesses to recover cash from an inventory investment. 120 days feels like a lifetime when revenues are under pressure. Depending on the severity of the decline, selling current inventories at a wholesale discount might be needed to drive as much cash into the business as possible. Even if it lengthens delivery or lead times, being very conservative with new inventory orders is a good idea in uncertain demand economies.

Provide New Payment Alternatives
Payments are paramount to success. Allowing customers to pay in installments when their cash positions are squeezed is a way to keep sales moving. A customer financing program can even allow your customers to pay over time while you get 100% of the sale price funding in hours to days.

Preserve Cash With a Smarter Approach to Financing
Sudden economic shifts often require urgent investments in equipment and technology to support a changing business model. Acquiring technologies for remote work , adding new POS systems to support touchless customer experiences, or retooling a production line to produce healthcare-related goods during the COVID-19 crisis are just some examples of these scenarios. By leveraging an equipment finance relationship, you can acquire the assets and structure payments to align with limited budgets while preserving cash flows.

As your company seeks funding to reinvent or retool through a challenging time, we’re here to help. It’s what we do.

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