Bite-sized advice on cashflow in time of crisis for startups and SMBs


Much has been written about the economic damage that COVID-19 is wrecking.

While there has been a fair bit of general positive-thinking advice written for SMBs and start-ups, there haven’t been that many practical advice condensed into bite-sized tips that are actionable in this difficult period.

I would divide the road ahead for startups into the short-term and mid-to-long-term, each with a different set of priorities.

Tactical short-term on cashflow survival

The immediate priority for startups is two-fold: cash flow and liquidity. Companies have to ensure sufficient cash flow (perhaps for at least the next six to 12 months). Those that have accumulated strong capital reserves over the years have less to worry, but the rest might have cashflow concerns.

Businesses have to start with scrutinising the balance sheet line by line and consider the five steps below.

  • Single out unproductive and risky assets. Put idle assets to use or convert to cash

Under-utilised assets may include production and manufacturing plants, equipment, real estate. Rather than to leave them idle, businesses should try to optimise cash-earning potential by leasing or licensing to others that require them now. Businesses may also prepare to sell these, if they are not integral to business operations, to others who might be looking to acquire.

Also Read: Using design sprints to solve COVID-19 business problems

  • Chase for account receivables. Sell off exposure to risky assets.

Beyond chasing outstanding receivables, companies might also prepare to sell off exposure to risky assets. Risky assets include stakes in or receivables owed by companies with weak balance sheets and high leverage or companies in sectors ill-poised to weather the downturn.

Companies should be prepared to write down or off assets that seem non-recoverable to do accurate cashflow forecasting for the immediate term.

  • Allocate resources. Cut spend and reserve cash for high-impact projects

Overhead expenses (e.g. rent, expenditure, professional fees) should be cut where applicable. Cash should be reserved for projects that have an immediate and material impact on profits.

Businesses should prepare to build up cash reserves for the prolonged economic fallout ahead.

  • Go through every single contract and obligation for payables. Check if remedies available if needed.

Re-negotiate favourable payment schedules to vendors, suppliers, and other creditors where possible. If impossible and your contract performance has been affected due to Covid-19, notice if there is a force majeure clause in the contract and consult your lawyers on whether it can be used as a protection in the specific circumstance.

Also Read: The essentials of managing your business financials at 4 stages of its lifecycle

  • Monitor liquidity, forecast cash flow and make use of digital tools

Companies should go through every single contract and map out what is owed to them and when they are to be paid. The same applies to map payables. Consider digital tools such as QuickBooks which have invoice chasing capabilities or Qwil which help with liquidity through managing on-demand payments (for contractors and freelancers).

Where applicable, start-ups should avail of government support – the requirements for these schemes have been shared on both offline and digital avenues (personal finance forums and communities). Given that the cost of credit is low now, businesses can also consider taking government-assisted loans.

The general rule of thumb now is to optimise liquidity and cash conversion. Aggressive strategies may even include broader restructuring, such as closing businesses or products that weigh down overall financial performance. Start-ups should also be on the lookout for sell opportunities as there are acquirers out there with cash looking for strategic assets.

Strategic mid-to-long-term on durable survival

As of now, nobody really yet understands the entirety of the economic fallout ahead. To prepare, start-ups should look to build a strong balance sheet, shore up capital reserves, and be strategic about adapting quickly their business model and operations to changing realities.

I suggest the following to keep in mind for post-COVID-19 preparation.

  • Digitise to cut costs and to reach new customer segments

As seen from global lockdown, digitisation in some cases can indeed make a difference in survival. Retailers that have digital storefronts are able to resume operations digitally (even if not fully) and be unhampered by closing physical operations would have had higher survival chances.

Also Read: Digitalising cashflow management and what it means for businesses

Even better if they had already been operating digitally, with a stable following of customers – they would not have had to worry about low brand awareness or the costs of switching customers to a digital platform.

I would divide digital tools into two categories:

  • Automate operations, cut costs

There are tools for automating various aspects of operations, such as digital accounting solutions (Xero, Quickbooks), some of which even have automated invoice chasing capabilities to ensure that you are paid timely. SchedulePay (by PayDollar) automates payments and payments collection, while Qwil facilitates on-demand payments and liquidity management.

Other solutions help with sales, marketing etc. These tools either provide savings by cutting hours and labour, or preventing payments from slipping through the cracks.

  • Reach new customer segments in the digital economy

If you’re operating an offline start-up, other tools help you reach into the digital economy. Tools such as Shopify, WooCommerce help businesses set up digital storefronts. Solutions such as PayPal, Stripe facilitate digital payments.

These all enable businesses to reach a specific audience on digital channels. For other retailers that need not have their own dedicated storefront, they can consider channels such as Etsy or Shopify.

  • Agile work processes that are design-thinking oriented

Startups have to be intentional about building agility into their processes, test ideas and innovate quickly. Slow decision-making can spell the difference between survival and death.

While this, of course, is dependent on the nature of the business (industries such as healthcare, biotech, manufacturing require extensive capital and longer R&D durations), startups should strive to be lean and agile where possible.

This goes beyond just the size of teams but into deeper aspects of bureaucratic management, hierarchy, and paralysed decision-making that pervade even startups these days.

Also Read: 10 principles of great strategy inspired by design thinking

As conserving cash and being quick to adapt to changing realities are key to outlasting the crisis, adopting lean and agile workflows achieves both aims.

Having a design thinking-oriented approach is also important to ensure that teams think in terms of iterations and sprints, allowing start-ups to test the effectiveness of new products and strategies quickly without spending too much in time or in cash.

  • Manage the global supply chain and geopolitical risks

The global climate now suggests that future global supply chains will be at risk due to nationalistic industrial responses to the pandemic. Start-ups might want to keep in mind when planning for the future that deglobalisation will likely intensify in the future ahead. Strategic goods will be increasingly produced within national borders as countries strive to be independent and to build domestic capabilities.

Businesses might start looking into diversifying their supply sources so they do not end up bearing the brunt of shifting geopolitics. Those that have been trade-dependent so far might want to start looking at domestic sources. Across the board, businesses should pre-empt rising procurement costs and find ways to manage or hedge these.


The full sum of the economic loss ahead is not a fact yet fully known to us. What startups can do is to adopt a defensive, risk-management strategy while keeping a lookout for and taking advantage of opportunities.

These opportunities may come in the form of new products or businesses aligned with durable themes from this pandemic (remote collaboration, healthcare, essentials, amongst others).

Geopolitical realities on the ground are also shifting every day. While these are beyond our control, businesses that are lean and agile will find it much easier to do the following: adopt defensive strategies, adapt to changing situations, develop the foresight to pre-empt obstacles ahead of time, and take advantage of emerging opportunities.

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