How To Deal With A Cash Flow Crisis In Your Business
Unfortunately, sooner rather than later most small businesses hit a financial iceberg. More often than not, this will be the dreaded cash flow crisis. This is when your order book is singing but your cash till is not.
If you haven’t yet hit a financial crisis with your start up or business, it is most important to try and do everything in your powers to prevent it from happening. Cash flow crises can be a major obstacle for most small to medium sized business and if you have got staff to pay, on top of suppliers and other overheads, then you simply have to stay ahead of the game.
Here is what we suggest:
- TROUBLE SHOOTING
If your business is already experiencing cash flow problems, it is important to set some serious time aside to thinking about how these problems occurred and how best to deal with them.
If for example it is one certain customer who is slow to pay, either recognize this fact and make sure you factor them in the next time you deal with that person, or even ask yourself if their business is worth the problems. Quite possibly they are, but they need dealing with.
- FUTURE PROOFING
Try and look into the future and spot any potential problems before they occur. Okay, we know this is easier said than done, but if you know there is a big public holiday coming up and banks will close etc then make allowances for that.
- INCENTIVIZE CUSTOMERS TO PAY EARLY
Most cash flow problems are caused by customers who have failed to pay promptly. Depending on your business or industry you may have a long wait to be paid by certain clients and possibly, you were not anticipating that. Large businesses and government organizations may be a good source of revenue, but they are not always known for their prompt payment. So give them a reason to settle up quickly. Offer discounts on invoices that are paid quickly and within a certain date. Maybe think up an offer that will get them pre ordering or pre-paying for their next delivery. Anything that you need to do in order to see some cash going into the till.
- SHOP AROUND
When it comes to your outgoings, you really need to tighten up and make sure that you are getting the best possible deal. This means checking everything, from which courier firms you use, what car you’re running and who your energy suppliers are.
Use own brands and generic products wherever possible, they are usually just as good as branded and can save you lots of money.
Add up your outgoings and expenditure on the ‘little things’. These can really make a big difference. If you are spending $5 a day on Starbucks, stop and make your own coffee, for example.
- MANAGE YOUR STOCK CAREFULLY
As well as managing your cash, you need to stay ahead with the ordering and paying for stock. Don’t leave it to the last minute to order and pay for essential items and then realize you haven’t budgeted for them. You need to know in advance what needs to be purchased and make sure it’s done in good time. You may even be able receive a discount for prompt payment.