COVID-19 & cash flow: Managing the ongoing concerns

The COVID-19 crisis created unprecedented challenges to cash flow, which may continue into the future. Whether you struggle with fluctuating revenue or need to get a handle on costs, these steps can help.

Step 1: Recognize you’re not alone

Cash flow struggles can be frustrating. While most small businesses were growing
before COVID-19, very few had significant savings.


of small businesses said, pre-COVID, that they couldn’t survive a 2-month revenue gap without supplemental cash flow.

Unfortunately, revenue gaps may be more common until the world is fully recovered. If you do come across extra cash, consider prioritizing an emergency fund.

Action tip: Unfortunately, revenue gaps may be more common today. If you do come across extra cash, consider prioritizing building an emergency fund.

Step 2: Analyze the disruption

Ask your accountant or use your accounting software to pull together your income
statements for the past few years, as well as an up-to-date balance sheet.


• Current and future sales
• Accounts receivable
• Existing financing

+ Assets


• Fixed operating costs
• Accounts payable
• Interest payments

– Liabilities

Compare your inflows and outflows to 2021, 2020, and 2019, to better understand how COVID-19 affected your business. Studying the disruption and how it progressed can help you plan for any future uncertainty.

Action tip: Create cash flow forecasts for the next 3, 6, and 12 months. You may want to create multiple forecasts to reflect different recovery scenarios.

Step 3: Make cash flow adjustments

How could you generate more income?

Think about how you can change your products or services to accommodate evolving customer habits.

Think beyond products and services to how you do business. Could changes, like doing more digitally, help you win more customers?

How could you cut your costs?

Think about how you time new projects. Does it make sense to invest in new products now, for example?

Ask vendors about updated terms. Consider creative solutions like discounts for on-time payments.

Adjust pricing
Evaluate changes by weighing lost revenue against your customers’ ability to pay.

Evaluate your assets
If you aren’t using equipment or assets, selling may eliminate an expense while generating cash.

Action tip: Research the potential consequences of any cost-cutting efforts to help you avoid surprises. For example, delaying payroll may violate the Fair Labor Standards Act, and skipping payroll taxes may lead to a penalty from the IRS.

Small Business Credit Survey, Xero