Top Strategies to Get Past a Cash Flow Crisis
As a small business owner, you like to feel optimistic. You have a good plan and implement it, believing that your business will only grow. The problem is that about 6 out of 10 businesses are still struggling with cash flow at the beginning of their road. Unless they find a way to overcome the crisis, they risk going into bankruptcy way too soon.
But what can you do when you reach such an impasse? How do you gather enough money to pay for the company expenses, while maintaining some profit? Here are some tricks to bring yourself back up when you are in such a crisis.
1. Adjust Your Business Plan
When you have a cash flow problem at the very beginning of your career, there may be an issue with your business plan. Perhaps you overestimated how much your demand will be, and therefore, made unnecessary purchases. Or maybe you are focusing on an area that is not very profitable, ignoring the one that brings promise. Review your business plan and check whether any adjustments are due or not.
2. Offer More Payment Options
Clients like it when you make payments easy for them. You may want to take only cash or debit card payments, but considering other options may be helpful. For example, you should offer online or credit card payments as an alternative. Digital wallets such as PayPal are also popular.
Few companies use cryptocurrencies, but if you work for investors, you may want to make it easy for them. For instance, setting up a Guarda TRX wallet or something similar may prove helpful.
3. Offer Incentive for Early Payments
Very often, cash flow issues appear when your clients do not make their payments on time. One way to prevent a recurring cash flow issue is to offer incentives to the people who make early invoice payments.
This may be something as simple as a discount. If your clients are expected to pay within the next 30 days, make sure they have a reason to deliver the money faster. Similarly, you can penalize late payments, which can give them even more of an incentive.
4. Increase Your Prices
Prices are rising everywhere to keep up with inflation. If you are suddenly facing a cash flow crisis and have no idea where it came from, perhaps you should consider increasing the prices.
That being said, make sure your clients know why you did it. You should also ensure the prices remain within reasonable limits. If you make them too high compared to your competition, it may end up backfiring on you.
5. Sell Unnecessary Assets
Perhaps you have duplicate tangible assets that you never really use, such as a second car that you use for sales. You may even have a patent or trademark that you are not using but are still paying for. If this is your case, you should consider selling them. The measure may be temporary, but it can still be helpful.
6. Send Your Invoices Early
To survive a cash flow crisis, you need to accelerate your receivables. Sending the invoices early can help prompt this action. Once your clients receive the invoices, they will be more likely to pay them and get them done.
If you send them at the end of the month, it might take longer to receive the payment. So, to get your money, send your invoice as soon as possible.
7. Get a Loan
The last thing you may want during a cash flow is to attract even more debt, but sometimes, it may save you. Consider getting a cash advance on your credit card or a business loan. If the problem is temporary, the next month’s cash flow can help you cover the debt. If it’s a recurring problem, you may want to avoid getting such financing, as it can make things worse.
8. Make an Inventory Check
When going through cash flow problems, you may want to make an inventory check. If your goods are not moving, you should not keep on putting your resources there. Consider selling them in bulk or at a discount.
Everyone loves a good deal, and you will solve your cash flow problem as the products get sold. Once you are done selling the items, consider reevaluating the prices or removing them from the line altogether.
9. Leverage Happy Customers
To get past a cash flow issue, you need more customers. Use your past clients for that, and put up a referral program. For instance, if they bring buying customers your way, they can get credit or a discount for the next purchase. It’s a win-win for both of you, as it costs them nothing to recommend your products to someone else.
The Bottom Line
Cash flow issues can appear in any business, big or small. It’s important to take a look at the cause so that you may come up with a solution. Sometimes, a change in strategy may be enough.