A cash flow crisis in business can elicit a knee jerk response from business owners. Sometimes these quick decisions cost you! At M Squared we understand the issues of managing a business.
Please note that these are general tips and each situation is different. It is advisable to seek advice before making a decision. Accountants are trained to look through your finances and find ways to reduce costs and taxes, improve profitability, and bring balance to your cash flow.
Accountability and personal responsibility on behalf of the business owner go hand in hand. Ask yourself the difficult questions first. Are private expenses gnawing away at your budget? Are administrative costs wearing you thin? Some suggest investing additional personal funds into a business for immediate resolution. With a cash flow crisis particularly this can be tempting or feel like the only available option. This method of rectifying the issue, however, can cause bigger problems down the line.
Today we’re offering some troubleshooting tips for individuals and businesses dealing with a cash flow crisis.
1. Chase up Debtors
It is common sense, but not always easy. When presented with a cash flow crisis it is crucial to keep on top of your outstanding invoices. Sometimes you’ve got to be honest and advise that you need immediate payment. Often though debtors just don’t have the funds to immediately pay their invoice in full.
Offering to receive payments in instalments or negotiating some sort of payment structure can put some much needed funding into your account and make a big difference. It is important to remember that being a little bit flexible is often beneficial to both parties.
2. Streamline your Business
Streamlining is not only a way to help rectify immediate cash flow problems but running a lean machine business helps act as a preventative measure
Downsizing your stationary order, reducing the number of computers at the office, cutting down on extras around the office (coffee anyone?), and selling any unused/unnecessary business assets can dramatically change the landscape of a businesses’ finances.
This is a good time to do a bit of office spring cleaning, we all keep things ‘just in case’, its amazing what you can sell on eBay. All the little bits add up to cash going into the bank account instead of out.
3. Research Additional Finance
Desperate times indeed call for desperate measures. When every step has been taken to rectify the issue internally, going to the bank is an option. Many banks offer short term funding or extended lines of credit. Presenting your banker with a very organised and clear accounts and forecasts greatly increases your chances of obtaining additional funding.
Just be very diligent about meeting your repayment terms. Interest rates, penalties, and other loopholes tend to apply in these situations so always be prudent regarding your payments!
Business owners face a challenging role indeed. The dynamics of business change so frequently and so do the organisation’s needs. Once you’ve managed and stabilised your financial situation some serious planning and long term discussions on the future of the business will be required. How long will your recovery take? What will it require of you, the owner, and your staff? Do you need assistance?
Seeking the advice of professional accountants can mean the difference in a successful recovery. Secure your business and your future by consulting today. At M Squared particularly we have over 30 years combined experience in business management, bookkeeping services, taxation, grants, and incentives. Let us assist you today.