Your small business’ cash flow can help it thrive or lead it to failure. However, some cash flow problems may arise that can lead you to a crossroad. You have to make tough decisions because of a crisis that hit your company. It’s not the end when this happens. There’s a way out, but it will depend on how you respond as the owner.
Here are some tips that enable you to bounce back from a cash flow crisis.
Have a Crisis Plan Ready
When a crisis hits your company, it’s best to have a plan to get you out of the problem. Review your processes, income stream, costs and operations. Doing so enables you to identify the main causes and find solutions for them. It provides your team with a guideline on what their role is during the crisis. It also allows you to make cash flow projections that can address immediate needs while balancing them with prospects.
One of the ways to bounce back from business cash flow problems is to cut costs. This comes in various forms such as:
- Removal of redundant jobs
- Cutting some non-essential operating expenses
- Changing suppliers (permanently or temporarily)
- Cut back on premium services
- Reduce stock or sell at a discount slow moving products
Reducing costs isn’t a surefire way to solve your cash problems. However, it’s part of the overall solution you need to implement.
Speed Up Collection of Receivables
Some cash flow problems start because of delays in the collection of receivables. Customers may have their own financial problems that lead to late payments. Whenever you decide to offer credit to a customer, you should clearly outline the terms and conditions of your credit policy. Seek partial payment from customers, provide different payment options, offer incentives for early payment and offer an installment plan. These may speed up your collection efforts.
Review the Terms of Your Payables
Your accounts payables might be one of the sources of your business’ cash problems. Try to negotiate terms with your suppliers. They might allow longer payment schemes and provide you with more options. This might depend on how long you have been doing business with them and your track record for previous payments.
Recover from your small business’ cash flow crisis with these tips. Improving your cash flow provides you with financial flexibility for both short and long-term objectives. We at Robookkeeper can provide you with affordable bookkeeping services for small business owners.