Without a doubt, the current COVID-19 pandemic has brought unprecedented disruptions for businesses. Businesses have been compelled to shift their operations and business models to ensure survival, employees’ safety, and customer retention in the face of the COVID-19 crisis.

Reports according to the  Kenya Association of Manufacturers (KAM) and global auditing firm KPMG states that 30% of SMEs have experienced a loss of between 65% – 100% with 49% of SMEs reporting losses of between 30% – 64%. This is because SMEs are hindered by inadequate capital, limited market access, poor infrastructure, insufficient knowledge and skills, and rapid changes in technology, making them more vulnerable during the COVID-19 pandemic. 

With the shifting economic climate, the business cash flow has been hit the hardest, notwithstanding the fact that cash flow is the lifeblood of any business.  A survey conducted by Kenya Association of Manufacturers on companies indicated that 79% are experiencing cash flow constraints with 86% of SMEs facing the same challenge making it difficult to meet their financial obligations such as salaries and operational costs.

However, Pezesha, as part of its fiduciary duty to be the voice of the SMEs across the markets it operates, has made an intentional effort to come up with measures small businesses can undertake to keep their cash flows healthy.

First, Pezesha reached out to its network of micro and small businesses who are already enabled by its marketplace to understand better how their businesses have been affected by COVID19 and what they are doing about it; their feedback led us to develop contextual tips for them in relation to cash flow issues. Below are some of the high-level generic tips that we would like to share for any small business out there to consider during these tough times. 

Here are proactive tips for effective cash flow management.

  1. Update financial records frequently. Make sure you have at least a basic understanding of your business’s monthly revenues and costs. Pezesha is happy to share with SMEs a FREE template that they can use to track financial records efficiently .
  2. Reduce expenses. Delay any avoidable payments or investments until the picture is clearer. Lower your debt  to the minimum level possible, and explore opportunities to refinance your most expensive debts including making partial payments.
  3. Cut costs. Check through and see what overhead expenses come out monthly, quarterly, or annually. Switch utility suppliers or cut back on  operating expenses (Rent reduction or relief) to save money. Renegotiate interest on loans or cancel subscription payments for things not regularly used, e.g. advertising.
  4.  Offer a delivery service. Businesses in the food and beverage industry have been adversely affected, leading to some bars, cafes, and restaurants closing shop. To ensure survival consider branching out and providing local home delivery through apps such as Jumia, Glovo, UberEats, or sky garden. This will not only be an excellent way to keep money flowing but also advertises your business online. Also consider using social media and online commerce tools to promote your business e.g. Instagram, facebook etc. Businesses not in food but in service industry, do consider diversifying to essential services in relation to your skills and additional value your customers need now.
  5. Consult with staff. Be sensibly upfront with your employees on the challenges due to continuing to operate normally. Talk to them compassionately about reducing working hours, reducing the number of staff, or reducing their salaries to ensure the business survival and retention. 
  6. Speak to your creditors and suppliers. Call all customers to whom you have sold on credit. Ask them to pay you now if they can. Consider enticing them with discounts and be flexible to take in periodic/partial payments. They might also be experiencing cash flow issues. Ask your suppliers for extensions on the amounts due to them, even if it is just for a short period. 
  7. Manage your stock. Consider selling stock that may not last for 3-6 months by offering promotions. Offer significant discounts/promotions on slow-moving or obsolete items. Don’t over order new stock during this period as demand could decrease based on your customers purchasing trends. Especially items that you think will be in lower demand than usual during the crisis.

Small businesses who take the Pezesha financial education modules, increase their eligibility with Pezesha on accessing affordable working capital in the short and long term. Visit our financial education chatbot to continue to learn more about essential business tips that will help you as business with the right knowledge/tips. Subscribe here through this link  https://academy.pezesha.com/ or email us at sme@pezesha.com to address any specific queries or questions you have on boosting your cash flow in your business. Be it in food, Fast Moving Consumer goods or any other sector.

Pezesha also invites collaborations with public and financial institutions to enable SMEs to ensure healthy cash flow during this period. This efforts will ultimately drive financial health and prosperity during and post the pandemic period. In the end, a positive impact on the economy as these small businesses are the backbone of an economic growth.