Cash Flow Management Tips for Small Businesses During the Pandemic

Cash Flow Management Tips for Small Businesses during the PandemicCash flow management has become increasingly challenging for small businesses nationwide in 2020. Did your physical store have to close its doors because of COVID-19? Are you unable to manufacture your products because of a collapse of the supply chain? Are you struggling to fulfill customer orders? If so, the amount of cash inflow is sure to have plummeted. As a result, more cash is leaving the business than coming into it. Cash flow management for a small business in any industry can be difficult even when the economy is thriving. However, today’s climate, it has become even more challenging. Knowing how to move toward a positive cash flow for your business could not be more critical over the coming months. Therefore, here are some tips to help you in 2021.Reducing Your Costs and Finding Alternative Sources of FinanceIt is essential for small business owners to cut their costs, from finding cheaper ways to ship products, to switching to lower-priced suppliers. Chasing after outstanding invoices is also imperative right now. Meanwhile, researching alternative sources of finance is also a good idea. As well as the CARES Act emergency funding, your business may be eligible for other local financial aid resources.Prioritizing Cash Generation Over ProfitProfit does not necessarily equate to positive cash flow, so your business should be focusing on generating cash instead. You can achieve this by

• marketing gift cards for your products or services;
• offering discounts to your existing customers;
• pivoting offerings for a better margin;
• repackaging services or products for the consumer market; and
• finding a niche within your neighborhood and filling it.

Empowering Your Work TeamSmall business leaders must now take the lead and empower employees. Communicate with your team members how they can help achieve your cash flow goals and business needs. This will empower them while investing in their resilience and boosting their motivation. An empowered team with an in-depth understanding of your cash flow management goals will be in a position to assist.Tax Implications of Working from Home during COVID-19Working from home has tax implications to consider. Employees working from home in a different state to which they usually work may trigger additional tax burdens. This may require employees to pay state income tax within their home states. Meanwhile, those states would subject employers to income tax nexus. This could also result in dual residency taxation or the need to officially change the state of residency. It is best to consult a professional accounting firm in such cases since state taxation issues are complex. Anyone working from home can also claim a home office deduction or reimbursement of employee expenses. These can be tricky issues to navigate, so consulting an accountant is wise. Windes can advise on cash flow management for small business owners and help you plan for the future. For questions or more information about this article, please contact our tax professionals at [email protected] or toll free at 844.4WINDES (844.494.6337).