The last few years have been incredibly challenging for many small business owners. While the dust has seemingly settled on lockdowns, inflation and rising costs are presenting new issues.
Experiencing a cash flow issue can be incredibly stressful. Keeping calm and thinking logically is a must to get through this challenging experience.
Here are five tips for managing emergency cash flow issues, so your business lives to fight another day.
1. Explore Short-term Solutions
Start by exploring short-term solutions. These aren’t long-term business strategies but rather a stop-gap measure to get you through the coming days and weeks.
Reach out to your bank and see if you can get an extension on your credit. Alternatively, explore short-term financing options like vehicle or boat title loans.
While it’s best practice to separate business and personal finances, business owners can submit a personal investment as a business loan. This requires the right business structure, documentation, and payback plan to work. Discuss with your accountant or financial advisor first.
2. Communicate With Your Vendors
If you cannot make your payments on time, proactively contact your vendors and tell them. Discuss options for extending your credit, making a partial payment, or delaying payment.
Understand that this is a huge ask that will also impact your suppliers’ cash flow; they have every right to refuse. However, many will understand that the best chance of getting paid is helping you keep your business afloat. Maintaining a strong relationship with vendors will help during emergency situations.
3. Push Sales and Accounts Receivable
Having streamlined invoicing and accounts receivable practices will help prevent cash flow issues. Put a dedicated person on AR duty if a cash flow emergency occurs. In a worst-case scenario, you can explore early payment incentives or invoice factoring.
Invoice factoring is similar to creditors selling debt to a collections agency for a portion of the overall cost. In this scenario, the invoice factoring company will purchase your outstanding invoices for approximately 70-80% of the value and a service fee. From that point on, they handle AR and collect the invoice total.
Pushing your sales is another way to get cash into the business quickly. Put your best salespeople to work pushing products or create a flash sale to draw more money into the business.
4. Cut Unnecessary Expenses
Get ahead of upcoming subscriptions and unnecessary spending until the cash flow crisis is over. If the business can function without something, put it on hold. Fortunately, most programs complete tasks that can be handled manually, and subscriptions can be paused or downgraded without penalty.
For example, cancel the subscription if you use a social media posting platform, and the bill is coming up next week. If the cash flow crisis is sorted by the next billing cycle, you can resubscribe with no interruption. Otherwise, have your marketers push content through the native platforms.
Similarly, email marketing platforms, communications portals, etc., are often tiered based on users or subscribers. Therefore, downgrading to a lower price point will help clear up some cash in the meantime.
5. Plan for Contingencies
Take some time amid this crisis and consider what factors led you here. How can you learn from this experience?
Use the tips on this list to get through the immediate future, but consider your long-term contingency plans if you want your business to survive.
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