QUESTION: The current pandemic is creating a liquidity problem for my business. I am quickly burning through my cash reserves. What can you suggest?

ANSWER:  In my last article I mentioned that times like these present an opportunity for reflection and forward thinking. No one could have anticipated COVID-19. Neither can one can anticipate a disastrous fire or predict the next recession. Any of these events can work a hardship on your business.

Retail stores, restaurants, and service businesses that operate in seasonal destinations know the importance of managing cash flow. So, what is “cash flow”?  In simple terms it is money flowing in and out of your accounts in a certain time frame.

It is your job to anticipate potential problems before they occur. You must look ahead and project your anticipated earnings and expenses for a given period, and the cash you will need to have at your disposal to pay your monthly obligations in a timely manner.

To begin, you must construct a 12-month forward looking budget. If you have been in business for a while you should have an idea of what to expect from an income standpoint. There are fixed expenses like payroll, rent and utilities that are due each month and other expenses like insurance, taxes, inventory and supplies that come due at certain times of the year.

If you extend credit, you must keep on top of account receivables. A smart strategy is to invoice customers electronically and set up automatic payment reminders, as well as past due notices. Require a deposit of at least 25% at point of sale. Remember the only “valued customer” is one that pays in a timely fashion.

Do not overstock and try to negotiate favorable terms with your suppliers. You will never know if you are getting the best deal unless you negotiate. Be sure to reciprocate by paying your bill on time.

Some months are more productive than others. Being cash flow positive means understanding the flow of money in and out of your business and making adjustments to compensate for short or long-term disruptions that may occur. Set aside a 10% reserve for contingencies over the next twelve months.

No matter how diligent you are in managing your flow of cash, it is a good idea to have a bank line of credit in place. The credit lines are for emergencies and cost nothing until you draw upon them.

To assist you in developing a cash flow management plan, SCORE provides an excel spreadsheet that can be accessed at


Gray Poehler is a volunteer with SCORE Naples and can be reached at Business counseling is available, without charge, from the Naples Chapter of SCORE. Call (239) 430-0081 or visit The SCORE business office is located at 900 Goodlette Road North, in the Fifth Third branch bank building. Office hours are 9 a.m. to noon, Monday through Friday.