When first starting a business, you would be excused for thinking that a profitable company is in perfect financial health. However, you quickly learn that the figures on your balance sheet don’t necessarily correlate to the finances available at any given time. If you truly want to keep the operation running smoothly, cash flow management will need attention.
Poor cash flow may harm your business in many ways. It can slow expansions or limit your options for improving the company. In turn, this may negatively impact customer interactions, thus costing you sales and loyalty. Moreover, the repercussions of failing to meet financial obligations can have a drastic impact.
So, what are your options for overcoming cash flow issues? Let’s find out.
Borrow
Are your cash flow troubles a result of delayed income, such as monies due from client repayment plans? If so, you simply need to plug the gap so that funds are immediately available. This will allow you to satisfy your outgoing obligations. In turn, this will remove the stress of this situation as well as any financial complications.
A same day bridging loan is the best option. Firstly, it is a very convenient way to access capital fast. Moreover, the temporary nature of the loan (usually anywhere up to a year) means you pay less in interest overall. It is also a suitable solution if you are waiting for the sale of a commercial property or a part of the company to clear.
It is a cost-effective and convenient way to manage a short-term cash flow issue in style.
Generate A Cash Injection
If you are in desperate need of more capital, it is possible to sell your way out of the hole. However, if you want to generate a quick injection of cash for cash flow purposes, you must act fast. The traditional approach of long marketing campaigns and the option of repayment plans for customers will help. But it won’t suffice on its own.
By tapping into new revenue streams, you can generate quick funds while also setting up long-term benefits. Selling unused assets or equipment is a very effective method. Running a sale on old stock is another way to get cash into the business accounts fast. This could be done via a promotion day or an eCommerce sale.
Hosting ticketed events or using paid online content like courses may be useful too.
See If Staff Payments Can Be Delayed
Postponing staff payments without prior warning is never advised. It will harm productivity and morale while also leading to costly staff turnovers. But you may find that some employees are happy to get paid a week or fortnight later as long as they won’t miss out on any money. You can sweeten the deal with an extra holiday day or flexible schedules.
Before asking any employees to do this, you should check whether you are in a position to do this yourself. Or even use personal savings to solve the cash flow problem. When speaking to employees about delayed payments, honesty can be a good policy for microbusinesses. But you must reassure them that the long-term figure of the company is stable.
It is probably the last resort. Still, desperate times may call for desperate measures.
Negotiate New Terms With Suppliers
Your cash flow issues are probably linked to the fact that you let clients spread their payments.
So, mirroring this approach to your business purchases could be a quick way to solve some of your cash flow issues. Or at least stop them from worsening. However, you can’t just stop paying bills as it will harm credit scores and business relationships.
Instead, you should focus on negotiating better terms with suppliers. For a one-off solution, you may simply ask them to avoid taking a payment this month. Alternatively, extending the invoice payment date from 30 days to 60 days on new purchases can be useful. It buys you more time to let cash from your accounts receivable arrive.
It won’t have much impact on your bottom line but can work wonders for cash flow.
Chase Invoices
Finally, you can put your cash flow management back in good health by getting clients to pay sooner. Aside from solving this issue, quicker payments will prevent the risk of bad debt building. The key is to ensure that you stay professional and positive with customers. After all, you don’t want to turn customers off. And you did agree to the terms they currently have.
Nonetheless, sending gentle reminders that invoices are due within the next X amount of days could see some clients pay now. Another option is to offer a small discount or waver a small fee for customers who settle the bill now. It allows them to make the choice rather than forcing them to take action, but could still boost your hopes of quick settlements.
Even if 10% of payments due are paid right away, your cash flow will look far brighter.
