The rough economic times are hitting everybody, and unfortunately that can mean bad things financially for your business. Some businesses have been going through tough times with things such as meeting payroll and paying bills or other expenses. With banks lending out less and less financing, some small business owners have been forced to tap into their personal savings and max out credit cards just to stay afloat.
During times like this, it’s imperative that you stay on top of your finances and work on ways to more effectively spend money. Here are some tips to help you better manage a cash flow crisis at your business.
Make collections a priority
Getting payment in from customers will be a huge help in managing your cash flow crisis. Call customers about payments that are overdue or even about payments that are going to be due soon. With customers you have better relationships with, you could even ask for early payments to help with the cash flow situation.
For any accounts that have gone awhile without payment, offer to give a 10-20% discount if they pay now. Otherwise, you could have to hire a collections agency that will cost you a decent amount of money any way. Finding a way to get any and all payments in as quickly as possible should be a priority.
Invoice early and often
Administrative tasks tend to be the ones that are put off the longest because they’re menial and it’s easy to procrastinate. That being said, you cannot afford to postpone sending out invoices during times like these. The longer that you wait to send out invoices, the longer you will have to go without that money. Stay on top of invoices and ensure that they get to where they need to be in due time.
Moreover, consider billing customers more frequently. If you normally send out invoices once a month, try doing it twice a month instead. This should help speed up immediate cash flow for your company.
Manage your credit cards wisely
Credit cards can be great if used effectively and deadly if mismanaged. Stay on top of all of the expenses you charge to credit cards in a spreadsheet with easy access. In times of a cash flow crisis, you will want to maximize how much you can take out through cash advances, because that is almost the same as cash. Charge business expenses to credit cards with higher merchandise credit, but no cash advance credit. Saving the cards with cash advance credit will help you when you get into a jam.
This is usually the last option that any small business owner would want to contemplate, but one that deserves consideration nonetheless. Each member of the team is special in his or her own right and letting anyone go from a small business usually means fairly drastic changes. Nevertheless, after letting someone go you could hire him or her on as a freelancer, which will cost less in the long run. By doing this you can avoid costs such as health insurance, payroll and stock options. Moreover, this will allow them to pursue other opportunities in their free time to help them make ends meet.
A cash flow crisis can be a terrible ordeal. With the right approach, however, you can get through it and help your small business continue to grow.