If you are a business owner, you will know only too well how hard it can be to keep operations running smoothly. Whether your business is a small start-up or a successful big hitter, it’s inevitable that things will go wrong from time to time. Either you come across an unexpected expense, or you realise that your original business plan wasn’t right for the market you are targeting. If you haven’t planned for this, it can seem like the end, but you needn’t throw the towel in. If your business is suffering from a cash flow crisis, here are some of the things you can do.
First Things First, Don’t Panic!
A cash flow crisis can cause you to panic, but you are likely to make rash business decisions if you don’t take a moment to calm down and see things objectively. Look at the options open to you, and identify which of those are the least drastic. If you choose to get rid of employees or release important assets, this is something you cannot easily reverse.
Identify Unnecessary Expenses
The next thing you need to do is identify which expenses you can afford to cut down on. Look over your bank statements from the past 3-4 months to find out whether you have any unnecessary subscriptions you can cancel or outgoings that can be reduced by switching supplier. You may also want to see if your employees will accept either a delay in payment or a partial payment, as salaries will no doubt be one of the biggest expenditures of your business. This isn’t always the first thing you should consider, but if the alternative is job losses, it’s definitely worth discussing.
Contact Your Suppliers
If you are usually a good customer, it’s a good idea to contact your suppliers and see whether they would accept a temporary change in payment terms. They may be willing to extend your payment deadline or give you a discount. If you manage to secure a reduction from more than one supplier, it can soon add up and help towards getting you back on your feet. Don’t assume that they will always say no, as they need your business to stay in business themselves.
Check Your Accounts for Late Payments
If you are facing a cash flow crisis, it may also be because your customers are late with their payments. With most businesses dealing with the economic challenges brought about by the current pandemic, it’s likely that this is the root of the issue. Make sure to follow up on delayed payments and persist until they are made, as you can’t operate without them.
Consider Increasing Your Prices
It may be possible to save your business by simply increasing your prices. This will bring in extra cash fast, but it will depend on the nature of your business, whether or not it may turn customers away, and if you already have competitors charging a lower price. You could also consider keeping the price point the same but reducing your product size.
Take Out a Loan
If all else fails and you are still facing a cash flow crisis, the only option is to seek additional funding. Taking out a short term business loan is a popular short-term solution for those who do not want to see their business go under when they have tried every other option. You can borrow anything from £5,000 to £100,000 with flexible payments in accordance with the cash flow of your business.
Before you assume that the cash flow crisis you are facing is the end of your venture, try some of the steps outlined above.