Last blog we wrote a post on how to monitor your cash flow because especially at this time of the year, cash can be tight for many business owners.

We thought we’d follow that with a blog on what to do if you find yourself currently experiencing one.

Assuming that you’ve already tried to cut as many costs as you can, there are several things you might try to solve a cash flow crisis – some temporary strategies and others longer term.

  1. Send your invoices in a timely fashion – don’t wait months to bill someone. It can give the impression that you’re not fussed about being paid. You might even consider asking for payment (or part payment) upfront. And ensure that your invoices are clearly dated and your terms are clearly spelled out.
  2. Chase late payments – often the squeaky wheel gets the oil. Yes, it can be hard – but do you really want to let someone get away with not paying you in a timely fashion (or at all in many small business cases)
  3. Do a credit check on new customers. This is something that so many small business owners just don’t do. And unfortunately there can be unscrupulous people just waiting to take your products/services without paying. It might not happen often, but almost every business owner has a story they can tell.
  4. Shorten your payment terms. If you’re currently working on 30 days (and that really means 60 to your customers), change to 14 or 7 days. Let your customers know, and then send a polite reminder Don’t become the benevolent bank for your customers. Keeping your business afloat will benefit them (and you!!) more greatly in the long run.
  5. Consider factoring – this is essentially when you sell your receivables (invoices) to a third party at a discount. Ie: they advance you the cash and take a commission. You receive 70-85% of your invoice and the rest is the ‘factor’s’ commission and the factor chases the invoice (which now belongs to them).
  6. Accessing cash debt – now whilst this isn’t strategy we suggest lightly, if you know you’ve got sales under control and your cash flow is a just a matter of timing, you may consider drawing on an overdraft facility. Just make sure your borrowings are set up correctly or you might not be able to claim interest charges as a tax deduction. You might also think about borrowing on a credit card which plenty of business owners have done in the past. Yes, it’s extremely expensive and if you’re well and truly in a deep hole already, risky – but it has been done in the past. Always seek professional advice before taking on extra debt load.
  7. Go get some more sales – now this action you always have control over. If you know this is likely to be a lean week, month, quarter based on current projections – put yourself into sales mode. Talk to existing customers and see if there’s anything else they require (think about implementing the upsell – “would you like fries with that”? – what else could you tack on to what people are buying). Ask if they know anyone who might benefit from dealing with your company. Ask your suppliers if they know anyone that might benefit from doing business with you. Then use linkedin, chamber meetings to get out there and actually talk to people.

So there you have it – seven suggestions for you to consider to solve a cash crisis should you ever find yourself in one.

If you do happen to find yourself embroiled in your own cash flow crisis or you want to prevent one from happening in the future and you’d like a professional opinion on the best ways for you to move forward, we’d be delighted to talk to you. You can call Kerry on 6023 1700, drop us a note or connect with Kerry via LinkedIn.

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