It is estimated that as many as 70 new businesses are formed every hour in the UK. However, up to 60% of these companies will fail in the first three years. On many occasions it is the mismanagement of cash flow that is the underlying factor. If your business falls into a cash crisis there are some actions you can take to find your feet again. Award winning credit brokers Cash Lady explain more.
Consider A Small Loan
In order to find parity you sometimes have to rely on an injection of cash from external sources. Before doing so, make sure you have done everything possible internally to solve the problem. If you are still coming up short, a small, short-term loan will help bring in money that can be used to stabilise the business. Before doing so, consider how much you will need and devise a plan for how you can pay back the loan on a monthly basis without putting the company at risk in the future. You do not want to find yourself in the same situation again in 6-12 months time.
Expedite Incoming Payments
The more money you have coming in, the easier it is to alleviate your cash crisis. Rather than wait for payments to be made, contact customers and incentivise them to pay early if they are still within your standard payment terms. Starting with a low rate, offer a one-time discount after explaining your situation – they may push for a better deal but by starting low it hopefully won’t eat into profits too much. Also make sure everyone who should’ve been invoiced has been because the sooner you raise them, the faster you’ll be paid.
Negotiate With Suppliers
Negotiating a short-term payment plan with your suppliers may be easier than you think, especially if you have a good payment history and relationship. Some will probably have found themselves in a similar position at some point and as long as they receive their money, will usually be open to finding a middle ground that works for both parties. Gather a list of who is due for payment and start with suppliers who you rely on the least. If they can’t arrange a payment schedule, they may offer to reduce it, or offer something else in terms of future payments.
Reduce Your Expenses
When you are experiencing a cash flow crisis you should have a clear understanding of what is happening with your bank account. This should already be the case before any emergencies, but if not, now is the time to get up-to-speed. Eliminate any unnecessary expenditure so only the absolute essentials are being covered. Wherever you can cut back on spending, do so, and minimise the effect your expenses are having on your cash flow. Your bank account will have to become mean and lean until the business is stable and starting to head in the right direction again.
Sell Unnecessary Assets
When business is going well, many see it as the opportunity to invest in infrastructure that can help them expand. Sometimes it works and at other times it doesn’t. If you have equipment, machinery or online tools that are not delivering the sort of return you initially hoped for, now may be the time to consider selling. If you have any assets that are not essential to supporting your business right now, strike the right balance between a sellable price and one that will produce enough funds to help alleviate your current cash crisis.
