Even before COVID-19 hit, many business owners stayed up at night worrying about money. These five steps can help you manage your finances as we work toward a “new normal.” 


  1. Make a list of your expenses and revenue

Or ask your accountant to share this list with you. Look over your balance sheet (assets and liabilities) and your income statement (cash flow).

This may seem overly simple, but many owners aren’t tuned in to monthly accounting details or various payment terms. If you have to prioritize or renegotiate your finances, it can help to see all of the moving pieces.

If you need a refresher on bookkeeping terms and technical details, the U.S. Small Business Administration (SBA) offers a free 30-minute “introduction to accounting” course.


  1. Develop multiple possible scenarios

The overall outlook for many industries remains unclear. To help plan, consider a number of scenarios and analyze what your finances would look like in each.

For instance, envision the rest of your year if revenue is at 50% of pre-crisis levels. What about 15%? Or imagine you’ll see a jump in activity due to pent-up demand. Can you ramp up quickly enough to meet it?

What does cash flow look like in each scenario and how do you build inventory and staffing to meet your needs? If you’ve had to adjust inventory and staffing due to a previous closure, how long will it take you to readjust to meet new demands?

Read more on rethinking your operating model.


  1. Communicate with your partners — customers, suppliers, and bankers

Managing expenses is going to be key. The good news is, nearly everyone is aware of the ongoing challenges facing business owners and will work with you. Be transparent about your ability to pay your vendors and make payments on any outstanding loans. The scenarios you developed in step two can help you speak realistically with creditors about when you’ll be able to pay them.

You can also negotiate with customers. In addition to any discussions you’ve had about keeping their business, don’t be shy about discussing payment terms. You could ask them about paying in advance for previously scheduled orders in exchange for a discount, for example. Creative solutions may be able to help you improve cash flow.


  1. Look for new revenue streams

It’s a good idea to think about different sources of revenue. The COVID-19 crisis has changed Americans’ outlook and how we do business. It remains to be seen how many of those changes might be permanent and it’s worth testing your business against different scenarios.

For instance, some people may eschew restaurants or live entertainment in favor of cooking at home and digital entertainment for years to come. What does that mean for your business? Let’s say you print T-shirts for musicians to sell at concerts; you might need to consider different distribution ideas or using your facilities to make a wider variety of merchandise.


  1. Create a safety net

Uncertain times call for flexibility, and many small business owners don’t have an emergency fund. While that should be your goal in the long run, credit can help you stay on top of cash flow as you rebuild. Apply for a line of credit or look for credit cards with low introductory rates to help you get back on your feet. 

If you decide to use credit as a safety net in the short term, be sure to keep one eye on your long-term goals, too. When dealing with credit and potential debt, it’s important to consider your balance sheet as well as your bottom line.

While there’s no easy solution to ease financial worries during a crisis, there are steps you can take to feel more in control. Focusing on facts, building varied forecasts, and communicating openly can help you secure funding and better prepare for the future.


SOURCES: DaySmart Software, National Law Review