You’re adding up the business’s numbers one afternoon and suddenly you spot it – the books clearly show that you’re already in the middle of a cash flow crisis. Have you been misled by your profit margins this whole time?
More importantly, how does your business survive the next couple of weeks with less funds than it desperately needs? In order to figure out what your next steps are without sacrificing your business’s longevity, focus on these four aspects of cash-flow management:
1. Buy yourself some time.
Chances are, there’s been a major disconnect between what you’ve been forecasting and how your cash has been moving in and out of the business. Instead of limiting your options to what’s immediately available, make an updated cash flow forecast and identify new opportunities. You may realize you’re only looking at a temporary shortage instead of an all-out business dilemma.
2. Slow down that outflow!
It’s always important to patch up any holes where your money may be trickling out, and avoiding extra costs while you’re at it. The important thing not to do during a crisis is to find cash at the cost of your business relationships. Here are a few things you can try:
- Prioritize which creditors or suppliers to pay first. Ask the rest if you can delay payment until the funds become available.
- If you’re going to cut pay, start with your own paycheck. You need to be willing to sacrifice this comfort before you even ask your staff to pitch in for extra work or less benefits.
- Minimise expenses but don’t skimp out on taxes! While monthly team lunches are a luxury you can set aside, government-required payables should be treated as non-negotiables.
3. Speed up cash inflow.
And essentially try to replenish funds as responsibly as you can.
- Keep your inventory moving. Hold a sale of surplus or slow-moving stock to raise cash more quickly.
- Collect receivables from accounts that are due and customers who are able to do so earlier. This can work especially well if you and your customer have been doing business for a while. Sending an invoice earlier than usual (with an adequate explanation) may earn you advance payments from clients who trust in your brand.
- Be transparent with your banker. This works to your advantage not only as a way of delaying your own payments, but of possibly borrowing extra. Banks can be generous to clients who have excellent credit history. They’ll probably even appreciate it more if you gave them a heads up instead of simply running out on payments because of bankruptcy.
4. Consult your accountant.
With expert advice, you may find yourself looking at more options than you originally had. People who have had experience managing business and cash-flow concerns can tell you that situations of crisis aren’t all impossible to overcome.
If you’d like to learn more about good business habits and cash flow management, our friendly team of professional business advisers and accountants are more than willing to help. Contact Omnis Group at 9380-3555 or 1800 99 66 90.