Four tips for entrepreneurs on cash flow management during crisis

Ilze Zoltnere, Head of Corporate banking

Business activity in the current emergency situation can be affected in very different stages of the operation cycle — from delivery of raw materials to marketing activities for goods or services. The standard daily work is most likely partially or completely different now for any company. During such time, companies with small financial reserves or an inconsistent financial flow are the most vulnerable. Moreover, financial liabilities, such as loans, are not the only reason.

Right now it is important that companies focus and find the most effective ways of minimising any potential losses. There are different possible solutions, yet what is important is that their implementation is thought-through and as timely as possible.
 
Make your work more effective

Trade enterprises that carried out face-to-face selling up to now are advised to assess the possibility of creating an online shop to sell their goods or services. Not only will that allow to not lose the current customers, but the circle of new customers can also be expanded. To motivate companies to introduce new sales channels, Luminor is offering support for a transition to online selling, allowing companies with the monthly turnover of up to EUR 100 thousand to use the e-commerce solution commission free until the end of August this year.

The new circumstances show how many and different goods and services can actually be supplied through the online environment. There are very good examples in the market, for example, companies that previously delivered food to restaurants now deliver goods to households, sports clubs offer online classes, as well as stand-up shows and concerts can be watched remotely.
 
Do not use fast and short-term solutions

It is important to do an impartial assessment of your financial capacities and cash flow. Postponing payments is only a temporary solution that will not resolve your problems in the long-term. It is more important to ensure timely settlements with the suppliers, employees and cooperation partners and not let debts pile up. The means of customers must also be considered — if they will not be able to pay the seller, the company will suffer even bigger losses. If possible, risks should be assessed together with partners and agreement should be reached on possible loss sharing or other cooperation terms.
 
Cut unnecessary expenses and do not make stocks

Although there is not one solution for how to better get through this emergency situation, it is advisable for everyone to give up extra expenses, avoid stocking up goods in warehouses and use the existing stocks for the sake of adapting one’s business plan. Small enterprises most likely do not have big impact on the suppliers and buyers, however, it is worth negotiating for the mutually most acceptable solution. It is exactly small enterprises that are most impacted by any delays, and if all product selling possibilities are not assessed and utilised, they can turn into losses.
 
Consider liabilities with financial institutions

Companies that have financial liabilities towards banks or other financial institutions are already being offered action plans and simplified support measures. Catering, restaurant, entertainment and tourism industries are currently experiencing especially hard times. Operation of companies in these areas has completely stopped, and in most cases they have had zero turnover since quarantine was declared. Companies that are unable to meet their liabilities for some time can be recommended to temporarily postpone their payments, in turn credit institutions need to review liabilities of the most affected companies: they can restructure loans, revise terms and conditions, including deferment of instalments.

There are also painful cases where a customer has purchased new properties or equipment just a few weeks ago, but now is forced to terminate contracts both with the sellers and the bank, resulting in substantial losses. In such situations, Luminor also provides consultations in such matters as much as possible.