Cash flow crises are among the most common (and most frustrating) problems encountered by small businesses and SMEs. A well-managed cash flow is integral for a business to continue running. But what if a cash flow crisis is already happening? Don’t panic. Try to implement the steps below:
1. Create triage payments
List all the payments due for the next three months. Create a priority list for payroll, from most to least important. Try negotiating for certain items to be paid later.
2. Hasten the collection process
Check your invoice list. Look for customers who has not paid their invoices and contact them, preferably by phone instead of email or messages. Create alternative payment methods if necessary to accelerate the flow of income. If you have good relationships with loyal customers, try asking them for early payment (give inexpensive incentives if you can). If you can afford a discount, do so to encourage early payments. What’s important is for you at this moment is to establish a health inflow of cash.
3. Cut your business costs
It’s important to look for what is causing your business costs to bloat. But tightening your spending too fast, too soon isn’t a good idea either. Make sure you’re not cutting a necessity. Create an organized system and list the business process; look for what is unnecessary. Audit outgoing cash, list what is essential, what is good to have, and what can be scrapped for now. If payroll cuts are necessary, start at the top of the ladder. It will show good leadership and loyalty to your employees.
4. Get more money
If offering discounts and reducing business costs doesn’t work well enough, the short-term solution is to obtain more money. You can choose to liquidate your inventory in order to temporarily increase the cash flow. If you choose this tactic, settle a way beforehand to replenish that inventory. You can also try proposing a loan to certain financial institutions, depending on how healthy your company’s short-term and long-term financial numbers are.
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