Cash strategies for uncertain times

Inflation is changing the way we do business. Chase’s 2023 Business Leaders Outlook survey found that 37% of business owners surveyed cut nonessential expenses, 36% raised prices on select products and services and 21% invested in technology to streamline operations.

Businesses of all types have shifted their focus to conserving cash and improving productivity. This combination of smart cash strategies and a slowdown of inflation may be why optimism is near pre-pandemic levels. In fact, many businesses are looking to accelerate: 35% want to keep growing full speed ahead, up 9% from June 2022.

Which cash strategies make sense for your business during higher-than-average inflation and an economic environment where growth continues to be strong even as uncertainty lingers? Let’s discuss a few ideas.

Do you have a savings account?

In a zero-interest environment, you might not have felt the need to put money into a savings account. But today, you can get a 3% annual percentage yield or more, and rates could go up again. Interest rates are up because the Federal Reserve is trying to slow inflation, which is why right now is a great time to put cash into a savings account to grow your money while you strategize for your next big move.

In fact, according to our survey, a lot of businesses may be in a good position to save. Of the businesses that aren’t currently pursuing financing, 54% said it’s because they already have sufficient capital on hand. If your business has extra cash, a savings account is a great place to put it.

Consider a line of credit

Before 2020, the trend was toward lean organizations that move cash and inventory quickly. This just-in-time approach worked when disruption was low, but COVID-19 exposed vulnerabilities that businesses will need to manage going forward. This includes taking a more flexible approach to cash and inventory.

Our survey found that many businesses are already shifting toward greater flexibility. The number of businesses seeking funding to better manage cash flow is up 6% since June 2022. Business credit cards continue to be the most popular form of funding: 48% expect to use a business credit card in 2023. But more businesses are also tapping into lines of credit, and 36% expect to use one in the next 12 months — up 9% from June 2022.

Why are so many businesses relying on lines of credit right now? Flexibility. In times of uncertainty, a line of credit means they can inject a significant amount of cash into their business quickly to address a new challenge or seize an opportunity. It’s a nimble way to manage supplies and inventory at a time when prices can fluctuate significantly. Stocking up when the price is right could be your best move. It also can provide a buffer to help transition between seasonal or industry shifts.

Are you ready for opportunities?

During difficult times, it can be tempting to hunker down. But remember that inflation is the result of a hot economy. There’s opportunity out there, and you don’t want to miss it. In fact, standing still as inflation rises means you’re actually falling behind.

With access to cash, you can read the environment and jump when the time is right — whether it’s to hire more staff, expand production or boost your marketing. For example, if a prime location becomes available, will you be able to sign the lease and begin renovations quickly? Without significant savings or a line of credit, you might move too slowly and miss your chance.

It’s also common for competitors to need to liquidate or for suppliers to cut prices to move product more quickly. Businesses with a strategy to maintain access to cash reserves or credit can be in a great position to pounce on these kinds of opportunities.

Managing cash is a key part of your resiliency plan

Cash flow is dynamic — it’s always changing. To manage it effectively, you have to be nimble, always looking for value and ways to make your business more resilient. In our survey, 56% of businesses said they have a resiliency strategy and another 15% are working on a plan. The businesses that are positioned for the strongest response to disruption will make sure cash is part of the equation. A healthy relationship with your bank is important during uncertain times. Talk with a Chase banker to discuss ways your business can think strategically about cash flow.