All businesses, especially small businesses run on cash.
The money moving through a business – its cash flow – is more important than many business owners realize. Over 80 percent of business failures are a result of poor cash flow. Sadly, it’s only once in a cash flow crisis that an owner may appreciate too late that cash was the lifeblood of their business.
In case you’re either in a crisis now or about to be, here are 5 tips to save your small business when money is tighter than ever before.
Get More Cash into the Business
Whether sales are down a bit or there’s a seasonal dip in the trade that’s steeper than expected, sometimes a company needs a cash infusion to get through the trading period.
Short term financing for UK based businesses is the way to achieve this. These types of loans run from only 3 months to a year, which provides ample time to repay the affordable monthly payments. Once the funding is in, it’s then sensible to look at other ways to deal with a cash flow problem.
Cut Costs Wherever You Can
Look at the upcoming expenses, the ongoing ones, and fixed/variable bills too.
· Upcoming Expenses
For the upcoming expenses, what are they for, and can they either be deferred or cancelled?
· Ongoing Expenses
With ongoing expenses that charge periodically, are these strictly necessary? Be exacting in your examination of the costs. Remember, services that are signed up for and rebill automatically are rarely reconsidered. See if they’re still needed or if there’s a less expensive one available.
· Fixed and Variable Bills
Fixed bills and variable ones such as utilities and telephone service aren’t cancellable. However, there’s often a more affordable tariff or the option to switch suppliers to get the costs down. Reduce the morning calls to only the urgent ones if afternoon calls on a business line are less expensive.
Also, look at using free VoIP calls for business contacts that use the same chat clients, like Facebook Messenger or Skype.
Talk to Creditors
Ask for more time from your creditors to slow down the rate at which money is flowing out of the business’s current account. See if it’s possible to pay an invoice in multiple payments over a few weeks, rather than all at once.
While this step might seem small, it can bridge a gap in available funds vs. outgoing expenses in the short-term.
Scale Back Expansion Plans
If the company is busy investing in expansion plans through extra marketing expenses and higher purchasing levels, a cash flow crisis is a strong indicator that it’s being too aggressive.
See if scaling back the expansion plans is called for. Usually, it is when running such a tight ship that new sales have failed to materialize fast enough to cover the rising costs. Take an honest look at the situation and aim to scale back proportionally.
Bill Clients Faster & Make It Easier to Pay
Many companies are slow to send invoices out. A few small businesses seem to almost feel guilty about it. Put simply, the faster you dispatch invoices, the quicker you’ll be paid. Speed up how quickly clients are billed.
Chase up unpaid invoices sooner than is normally done. Offer a small discount for early payment.
Provide several ways to get paid. If clients work online a lot, offer PayPal or Payoneer as a payment method.
By attending to overspending, expansion plans that have been too optimistic, and tightening up on the invoicing & sales ledger processes, it’s possible to reduce the possibility of a cash crisis happening again. Cutting expenses and seeking sources of new funding addresses immediate cash concerns too.
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