The COVID-19 pandemic has created tough conditions for survival worldwide. Small businesses were severely impacted because of frequent lockdowns and transport restrictions. According to a survey by Dun & Bradstreet, over 82% of small businesses have recorded a negative impact. 70% of these believe it will take almost a year for them to recover to the pre-COVID-19 state. Such unpredictable events have become a lesson for us to always be prepared for unwholesome times. If you are a small business owner or aspire to start one, OkCredit is here to give you 10 money lessons to learn from the COVID-19 pandemic.
1. Pay yourself first
In the current economy, money is essential for survival. Due to the pandemic affecting businesses and work so severely, many people faced financial crises. As a business owner, you tend to think about growth and scaling your business, but COVID-19 has taught us that paying yourself before reinvesting that money is crucial. Treat yourself as an employee and pay yourself a fixed income every month. This will also aid financial planning and help predict how much money is remaining, which can be re-invested or reserved for an emergency fund.
2. Maintain a financial reserve
The future is unpredictable, especially for businesses, because external factors like politics, global calamities, consumer behaviour, and new products or innovations tend to affect them massively. COVID-19 was sudden, with an impact too unexpected for us to grasp and be prepared for. Many small enterprises ran out of business because they were low on liquid cash and were not receiving any income. Therefore, creating financial reserves has become a must for a business, or even an individual, to tackle and survive unpredictable tough times. These reserves will help your business cover day-to-day expenses in times of reduced cash inflow.
3. Do not raise too much debt
Business is run by people for people. For your business to scale up or survive, you need to raise funds. Giving up equity in a small business is not an easy option, so you apply for a loan. A loan, however, is still a debt, and you must always be cautious about incurring large debts. If you take a hefty loan that you are unsure of repaying in a given period, it may pose a risk or a downside to your business, as delayed payments result in a bad credit score that will affect your future loan applications.
4. Start budgeting
Keeping track of expenses and incomes will help you strategise financially in the long term. Record the transactions and maintain a ledger and an Excel sheet. This can obviously be overwhelming or tiresome work, but with OkCredit Digital Udhar Bahi Khata, it becomes simple, paperless, and secure. It helps you maintain your ledger, without manually filling in Excel sheets. Budgeting and tracking your expenses will also help you analyse unnecessary expenditures and find your highest income sources. Once you ace this, you can plan and strategise to survive unpredictable tough times and avoid unnecessary costs to your business.
5. Schedule your payments
Running a business is hectic, especially when you are the sole owner. The transactions are never-ending and sometimes critical, like loan instalments. Along with menial expenses like electricity bills, rent, etc., it becomes difficult to remember the due dates of these payments. But thankfully, it is possible to schedule your payments with OkCredit and clear all dues on time. In this way, you don't have to worry about defaulting on dues, or fines. Moreover, OkCredit manages your business ledgers free of cost.
6. Keep a good credit score
Maintaining a good credit score is beneficial during a financial crisis or when applying for a loan to scale your business. You can maintain a high credit score if you clear your debts without delay. Always take a loan that you can for a given period so that banks and lenders are on good terms with you and help you retain your dit score. According to CRIF India (an RBI-approved agency), a good credit score is above 700 (in the bracket of 300 and 900). Keep your credit score above 700, and you are good to go when applying for loans.
7. Leverage financial technology (fintech)
The pandemic has taught us that the world can still run without physical cash. With the help of fintech apps, we can pay with a single touch, with zero physical contact. Leverage financial technology to run your business from anywhere and at any time. From tracking customer payments with OkCredit to dispersing the salaries to your staff using OkStaff, you can run operations with one click without the hassle of paperwork. As always, OkCredit will help you track these incomes and expenses so that you don't have to worry about keeping track of the cash flow.
8. Give customers flexible payment modes
During the pandemic, the no-contact rule was strictly followed all over the country. Even delivery apps did not accept cash-on-delivery as a mode of payment. Droves of people went digital to pay for their services and goods. Therefore, it is evident that opening accounts on fintech apps and going digital will boost your business enormously – it will regain and attract more customers, and they will have multiple options for paying. Money management also becomes less of a hassle as you don't need to count each transaction manually. OkCredit is able to manage the ledger for any business. The app is available in 10+ local languages for the convenience of all businesses across India.
9. Leverage social media
Social media can actually save your business money if used right. The price of advertising on social media is low, and you should leverage it to increase sales and traffic for your business and cut the usual marketing costs. You can also build loyal followings on Instagram, Facebook, and LinkedIn. Social media is slowly becoming a virtual marketplace as well – for example, Instagram is helping businesses by allowing them to tag their products directly, from where the customer can easily navigate to their retail website. If you have an e-commerce website, this is a lucrative option for you. Making an e-commerce store for your business will help you accept orders from your customers even if your offline store is shut.
10. Make a financial plan
The COVID-19 pandemic has made us realise that finance plays an essential factor in the survival of small businesses. Practices like budgeting, using fintech, keeping a good credit score, and scheduling payments should be followed rigorously to maintain the clarity you should have as a business owner, and avoid the impact of the uncertain times that have been unleashed.
Small businesses are an integral part of the economy, and the pandemic has completely shaken this system. COVID-19 has markedly changed our perspective and also imparted important financial lessons for businesses. We need to be financially cautious and keep up with the market, to survive times like these in the future.
1) The impact of Covid-19 on Small Businesses. How bad this has been?
2) How small businesses are coping during Covid-19?
3) Best COVID-19 Lessons For Small Business Sectors of India
4) How To Manage Investment During Covid-19 Pandemic?
5) OkCredit: All you need to know about OkCredit & how it works.
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Q. How will OkCredit Digital Udhar Bahi Khata help my business financially?
Ans. OkCredit Digital Udhar Bahi Khata will maintain a ledger to manage your day-to-day transactions. OkCredit is for all small businesses, therefore it is available in 10+ local languages. It will also send you a reminder via WhatsApp or SMS for monthly payments. You can access your statements and reports at any time, anywhere.
Q. How to do proper budgeting?
Ans. You can start with setting a goal and timeline. The timeline can be monthly, quarterly, or yearly. After defining a milestone and period, keep tracking your expenses. Analyse where you can cut down costs, and keep practising maintaining your budget and records.
Q. How to keep a good business credit score?
Ans. If you want to maintain a good business credit score, then follow these steps:
1. Pay business bills on time – This ensures creditors that you are trustworthy and don't usually delay payments.
2. Keep business debts low – As you take more loans, more debt becomes recorded on paper. Therefore, keep your liabilities low as creditors usually don't sanction loans to businesses in debt.
3. Take short-term business loans – Take low and short-term loans and keep repaying them on time. Take only an amount which is absolutely possible to repay in the given period. In this way, you can maintain a good credit score as well.