conserving cash

3 Quick Things You Can Do to Conserve Cash During a Small Business Financial Crisis

Gene Marks & Kelly Spors

The Coronavirus pandemic has caused a small business financial crisis. If your business is anything like mine, you’re most likely already seeing a drop off in demand and a slowdown in traffic. Sadly, many of my clients who operate “non-essential” businesses have been forced to shut their doors to limit the spread of the virus. Many others that may still be operating are doing so at a much more reduced level of activity.

Why A Small Business’ Cash Flow Matters

All this impacts small businesses’ cash flow. I think this crisis will be short term and I’m hoping we’ll get through this in just a few months and we’ll see both demand and economic activity significantly increase. But for now, it’s imperative to take whatever steps we can in our crisis management strategies to conserve our cash.

This means doing everything possible to maintain or ideally even improve the company’s cash position. Conserving small business cash flow is imperative to the success of a business long term, because cash flow problems can mean running out of the working capital you need to pay your employees, suppliers, bills and other expenses. Moreover, cash flow issues can mean you won’t have the flexibility to make decisions that could improve the long-term health of your business, such as investing in the development of a new product or service or getting financing when you need it. Given all of these risks, you should always be minding your cash flow—crisis or not.

How Can a Business Save Money Quickly?

1. Talk to Your Bank

My company uses a large, multi-national bank. Like many other banks, big and small, mine has been very sympathetic to the plight of its business owners, many whom are small businesses in financial crisis. The people I’ve spoken to also believe that we will move beyond this crisis in months, not years, and that the economy will indeed bounce back. I’m getting them to re-commit to my lines of credit and I’m already asking what’s needed to get more. I’m also discussing potential deferrals of payments or extensions of terms. So far, the response has been encouraging. As I write this, our credit and financial system is sound. And unlike the 2009 recession, capital is still readily available. I’m evaluating all financing and credit resources, while keeping my options open and doing my best to not spend.

Moreover, there are low-interest loans and a tax credit available to businesses that can help them weather the crisis. For example, the Paycheck Protection Program (PPP) is a loan program administered by the U.S. Small Business Administration in order to help businesses impacted by the COVID-19 pandemic. A business can get a loan based on the number of people it employs, and—the best part— the loan can be entirely forgiven by the federal government if the business uses the money toward payroll and other operating expenses within a designated time frame. Even if it’s not entirely forgiven, you only pay a 1% interest rate on the loan balance. If you don’t take advantage of PPP, you may be eligible for the Payroll Tax Credit, which provides a credit for each employee against your FICA payroll taxes.

small business financial crisis

2. Talk to Your Vendors and Customers

For my vendors who are large companies with more resources to absorb a slowdown, I’m asking for payment extensions. Big companies, like the banks I mentioned above, are also sympathetic to the small business financial crisis and are willing to bend some terms and rules to help see us through this challenge. I’m not pushing my smaller vendors and contractors yet. On the customer side, I’m stepping up our procedures to get our invoices out the door as fast possible. I’ve asked my accounts receivable to stay on top of any slow paying accounts with email and phone reminders. I’m also considering offering discounts for early payments and pushing for credit card payments. Yes, these cost a little more, but the goal here is to get cash in the bank to see my business through this challenge.

small business financial crisis

3. Do A Full Financial Review

Just this morning, I printed out our year to date general ledger. I consider this general ledger to be the diary of my business because it shows every transaction recorded. When things are busy and the economy is strong, like it was just a few weeks ago, I sometimes tend to get careless in my small business cash flow management. Not anymore. I’m going through each account. I’m cancelling unnecessary recurring charges for products or services. I’m questioning why we’re spending money. I’m planning on putting some contractors and projects on hold. Again, my intention is to resume as usual once things get back to normal. And again, I really do believe things will get back to normal in a few months. But in the meantime, cash is king and I’m going to be very strict in how I spend for the near term.

small business coronavirus financial crisis

Here is what I’m NOT doing. I’m not laying people off, because unemployment has been tight and when things get back to normal I’m going to need them. Plus, it’s just not right. I’m also not skimping on sales and marketing investments, because those things – like advertising, website development and customer relationship management software – are the things business people need if demand falls off.

Finally, I’m not panicking. I’m lucky that I have some cash in the bank because the last few years have been good economically. Because of that, I can make better decisions. If that’s not your situation, then I hope that not only will your business survive this crisis, but that you also take away this lesson: keeping enough cash is critical to survive any downturn.

The Bottom Line

Conserving cash flow is one of the smartest things you can do amid a financial crisis like we’re experiencing . Your cash situation affects your ability to weather unexpected negative events, such as a big drop in sales and revenue or an extended business closure or slowdown. The more cash you have on hand, the more flexibility and resilience your business will have. And thankfully, there are many potential ways to improve your cash flow—you just have to spend some time exploring your options and talking to right people and organizations who can help.

Also, be sure to check out the Small Business Assistance Guide: COVID-19 Resources and Relief Options to learn more about valuable resources and relief options available to small businesses right now.

Next Steps: Want to learn more? Sign up for the Small Biz Ahead newsletter to receive a weekly roundup of the latest tools, trends, and resources. 

50 Responses to "3 Quick Things You Can Do to Conserve Cash During a Small Business Financial Crisis"
    • Ras Adhvaryu | October 4, 2022 at 11:37 am

      Your help is phenomenal, the insights offered are very helpful for a small busineess. We are happier partnering with you.

      • Small Biz Ahead | October 5, 2022 at 10:10 am

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    • Praveen | October 12, 2021 at 6:03 am

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      • Small Biz Ahead | October 12, 2021 at 12:58 pm

        Thank you so much for the kind words! We’re so glad you’re enjoying SBA.

    • Faisal Ali | July 27, 2021 at 9:18 pm

      Excellent thanks.

      • Small Biz Ahead | July 28, 2021 at 9:00 am

        You’re welcome!

    • John smith | December 30, 2020 at 10:56 am

      I agree with every single word you say. Because I am running a medical billing company of my own. Gladly, I’ve helped a lot of physicians to come out of the problems related to medical billing, aging account receivables and compliance issues with medical coding updates. Therefore, I got a chance to also learn about the frustration of hundreds of physicians throughout my professional journey.

      I won’t miss out on the chance to declare that you’ve highlighted the right points in your article and every healthcare provider should use their valuable time to come across such informative platforms on the internet.

    • Plastiq | May 15, 2020 at 11:41 am

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    • Bobby Weir | May 12, 2020 at 10:11 pm

      How about this … pay your workers a living wage, cut profits, and quit crying. Get you lives right.

    • Gene Marks | April 29, 2020 at 10:19 am

      Miguel: Part time workers can receive a portion of their pay through unemployment but this depends on your state.

    • Gene Marks | April 29, 2020 at 10:19 am

      you are not required to terminate an employee. If you terminate then the employee can claim unemployment. Your SUTA is unlikely not to be affected. The employee would receive what’s entitled by the state plus $600/week through 7/31. You can hire back the employee anytime.

    • PAMELA EASLEY | April 27, 2020 at 4:21 pm

      For the 1099 person, you can apply for unemployment.

    • Linda Paquette | April 27, 2020 at 3:36 am

      I run the office for A father sole prop, with His adult son As apprentice In pine if the trades as a contracting business.
      The son bullied the father into letting him “collect” because his hours have been much less than normal, plus he was jealous. Of a 20 year old who was getting the $600. Incentive.
      We had just applied for, and are getting a PPP loan.
      I am in a battle with the father who said he will pay the son “ under the table” for the hours he works, In addition to the unemployment benefits!
      I am furious, because we have to pay the son legally, as always, ( through a paycheck company who will pull funds through the PPP loan account, For it to be forgivable.
      I say that what the father and son are trying to do is fraudulent and the son is double dipping, and will make the loan- unforgivable!

      Should we let him collect until we have the loan money in the account?

      We never told him he was later off. He just “insisted he was going I collect!

      And if I convince them to do it properly through the loan, Do I pay him actual hours worked? Or do I try to make up the deficit in his pay from working less hours? by paying him his former average weekly hours worked?

      Any advice will be welcomed

      .(PS. The Dad is my “ Life partner” as well as , (business partner” I took over all financial and business operations 15 months-ago).

      HELP! I want to Continue to run this business legallly and above board! Sincerely, LP, MA.

    • MIGUEL | April 25, 2020 at 2:23 pm

      one of my employee filed unemployment because we closed for one week when the
      shelter in place started in IL but after that we returned to work 4 hours less per week
      can she still continue to claim unemployment?

    • heather anderson | April 24, 2020 at 1:30 pm

      We had to let our employees go. We did not have contracts sufficient to pay them nor any savings. Even though the $600 enhancement makes some worker’s weekly payments equal or even more than their previous take home pay, the employees whom I laid off are eager to take their place in the workforce at their previous jobs as the economy picks up. Unemployement only goes for so long and when it’s over they do not want to be left behind by a company that valued their work. The security of their jobs over the long term is worth piece of mind that unemployment does not give.

    • María Luz Rodriguez | April 24, 2020 at 12:04 am

      Hi can you please give me a call?

    • Kelly M. | April 23, 2020 at 10:05 pm

      Unfortunately, as a small business, if it’s possible, you always need to be thinking ahead as you don’t always know what’s going to come your way. In my line of business, it’s feast or famine. With that said, we’ve had to learn how to save money whenever possible so during the famine, we’re still able to operate as usual without letting employee’s go to get through the slow time. Right now, these are definitely unprecedented times and I’m just thankful that we had a great 2019 which definitely helps. I’m also praying that this super slow down doesn’t last much past May. But again, as a business owner, you always need to be prepared for the unknown.

    • Deward Stout | April 23, 2020 at 5:53 pm

      Its interesting this article. However notice it was put out by the Hartford Insurance Company. How come, now that my business insurance is due the next few days, they have sent me a notice that states if payments are not paid on time there will be a penalty attached. Why are they not following this advice to extend to us?!?!

    • Dotti Bala | April 23, 2020 at 2:45 pm

      I own a small business in the printing industry. Unfortunately the Public and Private Schools and Local Government were the main focus of our business. Loosing more that 75% of our income. Now we know they will not be back until school starts again in middle August. I’m not sure what we will do until then. The everyday needs of our customers will not meet our commitments
      We remained open as curb side service through March and April and will continue to do so until we can say we are safe and can keep our employees and customers safe. I kept all my employees on and was able to pay them there usual wages. I applied for PPP and just received the money. However we used all our reserve funds for March and April payroll and supply, utilities and rents, etc.
      75% of the PPP money must be used for payroll 25% for rent & utilities. so there is not much left for supplies. Its a vicious cycle. I say chin up, this to will pass. Hopefully we will come out the other side with a business and our families well and happy. God Bless all of you and keep the faith.

    • Jeff Skillen | April 23, 2020 at 1:22 pm

      Smart moves to make at any time. One comment that I would make is regarding the ‘contractors’ you are delaying. Payments to these contractors represent their paychecks, and how they feed their families. Keep them if you can. If you must delay or defer work with them, please give them reassurances and a way to stay in touch on you plan to resume their services. Contractors have to make plans too.

    • Rebecca Neilson | April 23, 2020 at 1:22 pm

      Love the 3 tips. I do bookkeeping and tax preparation services. All of my business clients are small business with 20 or less employees. I have been offering them FREE assistance in applying for the SBA loans. But I am also stressing that all of my clients schedule a virtual conference to review numbers and see how we can keep their doors open at this time. If you are working with a bookkeepers, CPA or other trusted advisor now, talk with them. They can help you understand your numbers and give you tips on how to keep your business going. Remember that second opinion from a trusted advisor can give you the insight you need.

    • Henry Patterson | April 23, 2020 at 1:04 pm

      Robert Lane,

      Have you applied for an SBA EIDL loan? The loan application provides a grant advance that you get even if you don’t get a loan with them. It gives you $1,000 per employee up to $10,000. I applied March 31, and received the advance yesterday. I think you can apply at very simple application but be prepared to wait a month. Remember, it’s a grant advance that you don’t have to pay back even if you don’t get the EIDL loan.

    • Hershy S. | April 23, 2020 at 10:52 am

      It’s to hope that sitting at home and being jobless and bored, will bring end an up cause a horrible worthless feeling…

    • marissa belleza | April 23, 2020 at 10:47 am

      It is true that $ 600 /week incentivized workers to stay out of work and it is not easy to comprehend why the govt gave that much for 8 weeks on top of whatever unemployment benefits accrue to them.

      On the part of some employers, they allowed the terminated employees to file unemployment as a form of assistance to these people after all the company is also closing.

      What if the company comes back to operation? Isnt it that the contribution rate will go up and will affect the company’s cash requirement to remit the SUTA contribution?
      That’s one angle we are looking at.

      Please correct me in my understanding so that when a employee comes to ask us to
      do a favor to him/her we are equipped with the right thoughts.

      Thank you.

    • Ray Fougere` | April 23, 2020 at 9:56 am

      Tell your employees you are talking to the unemployment office about finding new workers. Also offer them their old position and record it. Be sure they know you are recording it. Actually communicate with the unemployment office about rehiring. If a previous employee is collecting and refuses his old position that may disqualify him for continuing benefits.

    • Carla | April 23, 2020 at 9:54 am

      The part of the article I don’t agree with is “to resume as usual once things get back to normal.” We are a small business and are very fortunate that are business is continuing even in this difficult time. However, we run our business in good times and in bad times in a very similar manner. We are very conservative with our spending and make a concerted effort to save so that we can continue to operate the business and keep employees paid for months, even without any work.

    • Anne Welsh | April 23, 2020 at 9:00 am

      M. Thibeault: From an HR perspective, I’m hoping that losing medical insurance, 401K company match and the other benefits will inspire people to return to work. In addition, missing camaraderie and a sense of purpose will direct people back to work. At least, that’s what I’m betting on.

    • Linda's Southern Kitchen | April 23, 2020 at 9:00 am

      I believe if you bring your employees back on limited hours, they can still collect unemployment. Most of your business will not come back overnight, so part would be a win for all. The extra $600 is only for 8 weeks I think

    • Patrick Daly | April 23, 2020 at 8:47 am

      For M. Thibeault,

      You will need to inform them that the $600 added benefit by the Federal Government is only temporary and can be rescinded at any time. If you send them an offer letter and they refuse to return to work my recommendation would be to move on to the next in line and part ways. The government did not this this added benefit through properly. But in the end you have a business to run.

    • Kathy Doherty | April 23, 2020 at 8:44 am

      Another source of cash for small businesses that develop products, processes, or software is research and development tax credits. This tax incentive is a dollar-for-dollar credit against taxes owed or paid. Federal and state r&d tax credits can amount to as much as 20% of the costs incurred in development activities. Not many businesses or CPAs know about this unfortunately.

    • Joan Brame | April 23, 2020 at 8:41 am

      I am a small business (gym) that promptly applied for federal relief packages thru SBA. Only response has been “no more funds available”. I don’t feel I should continue automatic billing so I am using my emergency back-up funds. Any suggestions?

    • Janet Chardavoyne | April 23, 2020 at 8:24 am

      For the unemployment issue – if you offer your employee their job back and they refuse to come back, they are resigning and will no longer be eligible for unemployment in PA. We are a small business and are seeing this problem too! Our employees also lost their health insurance on furlough and that is more incentive for some to return. That extra $600 was not thought out. It would have been better to give employees their full weekly pay through unemployment instead of $15 / hr extra!

    • Gary Soutullo | April 23, 2020 at 6:43 am

      I’ve been hearing everywhere and by everyone to ask big corporations and big companies to take it easy on everybody and to extend the payment due dates etc. however, we need to remember these big corporations and companies are being hit just like everybody else. We live in the greatest country in the world and we should focus on a positive come back and believe that it will happen better than ever! We have all had a couple of years of great success because of President Donald Trump and most of you know this is true. Anyone else as president and they would have already caved and we would all be sunk. Let’s all pull up a big boy and girl pants and take care of business in the greatest country in the world.

    • Robert Lane | April 23, 2020 at 2:33 am

      I have a small construction business Three months ago we had & still have 2nd quarter projects valuing just under 200k & one project started in the 1st quarter, contract value of 320k. Since this pandemic started, I’ve been notified both of two 2nd quarter projects have been placed on hold & the 1st quarter project has incurred an extreme slowdown in production. for instance March invoice was 50k. I expect April will be under 40k. My payroll, taxes & insurances average approx 20-25k per month. Honestly my credit is not the best but we’ve always managed to meet monthly expenses. Last years sales were just under 1,000,000.00 But, I find myself VERY concerned that the 40k currently in the bank & what will remain of the 50k (hopefully) coming in next week will not be enough yo keep afloat at this pace. At the beginning of March we had cash reserves of just under 100k. My employees have been with me for 10+ years & I’m doing my best to find work for them on my personal home in order to keep them somewhat whole but it’s getting more difficult by the week. Any advise would be greeted with appreciation. I’ve not yet but will soon be contacting my bank to see what assistance they can offer but have been reluctant to do so as I know any loans I secure will most likely not qualify as a grant & could leave me in a position that if & when we get through this I will be straddled with a loan of several 10’s of thousands & don’t want to put my company in a position of long term payments on borrowed funds to get through what I pray will be a few months. Anyone that’s gone through what I’m looking at I’d be very interested in any suggestion or comment. Thanks for your interest in my predicament & Please Stay Safe.

    • Zulema Soto | April 23, 2020 at 2:23 am

      I need a capital business for my business to move forward

    • Jo Landers | April 23, 2020 at 12:31 am

      For M. Thibeault – I’m pretty sure that if you called them back to work and they refuse (and aren’t sick or under quarantine or have another valid reason to stay home), they can’t collect unemployment anymore. But I’m not sure how you tell the state that there is work available for that person. In MA, disbursements for folks collecting unemployment for COVID-19 reasons aren’t even showing up in their employer’s account, so there’s no way to dispute their continued UI claim thru the online systems, and it’s not worth trying to call because of how long the hold times are.

    • Dr. Joye | April 23, 2020 at 12:21 am

      Agree wholeheartedly with these three interventions and I have done the same. In the end our businesses will be stronger because of it.

    • Henry Patterson | April 22, 2020 at 11:55 pm

      M Thiebalt,

      If they refuse to return to work, they are not willing to work and will lose their unemployment benefits. I do not have seasonal employees and I have a hard time with confrontation myself, but I think a gentle reminder that if they refuse to work, then they lose their benefits. My employees will actually be making more not working than what they will make working for me. I might leave them furloughed for longer until I know our patients are ready to return. But as a landscaper I imagine you’ll be back to work much sooner than I will as an optometrist. My two cents.

    • marvin earle | April 22, 2020 at 11:20 pm

      I’m a small business has been affected by the Coronavirus I’m looking for help with qualified in for some money

    • Charlene | April 22, 2020 at 10:49 pm

      The extra 600 Is only for a “duration”. Not permanent. But you must realize anyone making less than this is making a barely minimal wage. It’s time to re think wages. And as the article above suggests, look at your costs. This could enable better wages. And keeping the knowledgeable staff. They deserve it. And you will need them.

    • Pat W | April 22, 2020 at 10:39 pm

      My husband is a 1099er, with no help from any offers from state or federal governments….There needs to be Continued stimulus checks sent out to families, which Americans can use to open their business , or get out of debt caused by the virus. Most families have had no income since January

      We all appreciate the first check but that actually went towards old bills, etc. now we have to rebuild, as president trump has said, and that will Mean more money to be provided by the government. There is NO ONE else who can help.

      Thanks for listening 😄

    • Janine | April 22, 2020 at 10:31 pm

      All of our employees WANT to be on unemployment due to the $600/week extra government incentive that was just pushed out until July 31st. There was a major deficiency in that bill. Even if we can re-open (I have a restaurant) no one wants their jobs back. And then, the people that are in health care/grocery/Pharmacy still have to go in every day with no extra incentive. They all wish they were laid off – they would make more money and be safer. Its a joke. It doesn’t matter how “long term” your relationship with your employees is; they are going to do what is best to support their family in a time of crisis. The PPP loan is based on re-hiring and retaining workers but when no-one wants to come back then is defeats the purpose. Why didn’t the government see these acts/bills as conflicting?

      • Sindi | January 4, 2021 at 9:49 pm

        We have the same issue. I did contact unemployment after offering an employee, who was a server,
        to come back. Since my state shut us down for inside dining we did outside dining. His wage would have gone to 10$ per hour with tips and all he had to do was run the food to the tables. Customers placed their own orders at window. He said he was a server, not a runner and would not come back and unemployment agreed with him. We managed through the summer but everyone wanted to only work 1 shift so they could claim partial and still get the 600$

      • JCarrigan | August 2, 2021 at 11:36 am

        Agree with you 110%! The government did not think through this bill for unemployment benefits prior to implementation. The $600 per week (take home) unemployment was ridiculous! More than many employees were making from their jobs. How stupid, there was no differential between what someone in New York (where living costs are extremely high) or someone in East Tennessee (where living costs are very reasonable. There is no incentive for going back to work, bringing in less $$ than you are getting from sitting home drawing unemployment. This bill, along with all government decisions was made by politicians who have been in DC for years and have lost all common sense and reality of life. Our politicians have no clue what it takes to operate a small business. The PPP was ridiculous as it was based on keeping your employees on board during the entire time, or not receiving the full funding, if you did not keep employees on board it became a “loan”. Who can afford to keep employees on board, when the business is basically “shut down completely” due to government “stay at home orders.” The government has forced many small businesses out of business due to their stupidity and non realistic antics.

    • Lisa | April 22, 2020 at 3:51 pm

      The $600 weekly unemployment kicker was definitely not well thought through. It should have been up to $600/week, but not exceeding the employee’s previous wage. If the company offer the employee a job, and the employee turns it down, that person is no longer eligible for unemployment benefits. You can contact the unemployment office to let them know the employee has been offered a job. There is also benefits to consider; if they refuse to return to work you can take them off health insurance, etc., which is another carrot/stick for returning to work.

    • Gene Marks | April 10, 2020 at 3:03 pm

      For M. Thibeault

      I’m hearing this from a lot of small business owners and it’s an issue. The government is offering no good response to this. I guess in the end it comes down to the long term relationship you have with your employees.

    • M. Thibeault | April 9, 2020 at 10:24 am

      Unemployment payout increases of $600 makes our returning workers (seasonal landscaping) stay home and unemployed because they can make more weekly income. Hence no trained workers…unable to continue business. Any help or incentives?

    • Emmanuel Papa Aye Tetteson | April 5, 2020 at 4:02 am

      l need a business capital for my business to move forward.

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