Strategies For Surviving Cash Flow Crises For Your Business

September 9, 2021    accountantinperth

The cash flow problem is one of the most prevailing reasons for collapsing numerous businesses. As per the recent investigation conducted by Intuit with Wakefield Research, approximately 61% of businesses lack cash flow management strategies, hence they fail.

Such a problem arises when more money is gushing out of your company instead of coming into the business. It implies managers don’t have sufficient money to manage the payrolls and other expenses.

As the cash flow helps a business run smoothly, the situation gets worsened during this crisis. So, is it possible to mitigate the cash flow shortages? Without delaying much, let’s look at the top 9 strategies for surviving cash flow crises for your business.

Negotiate Your Payables

Can you hold up or minimise the cash flowing amount out of your business during this crisis? If yes, it will significantly help take the edge of the strain on your working capital. It would be best, to be honest with your employees and vendors while negotiating payments.

Also, talk politely about delaying payments might also be helpful. However, some could be reluctant to compromise, and others could be desirous of standing beside you during your strenuous period as you have been a staunch supplier for years.

Moreover, you would also likely be capable of getting some opportunities or maybe a minimised obligation from your utility providers.

Quicken Receivables and Modify the Collections

Various businesses have been experiencing an “invoice lag,” which means maximum time is taken to get paid by the customers. Therefore, in order to solve cash flow crises, taking adequate follow-up action and being quick on collection could make a remarkable difference.

Accelerating receivables is a significant key to overpowering this issue. The probable strategies would be sending invoices early, asking potential and existing customers for a partial payment, and proactively following up on those clients whose payments are still due. Additionally, you can verify if any improvements are required in your business collection to streamline the process. At a glance, you could also enable mobile payments or add various payment methods to your business website.

Control your Inventory

A sluggish inventory procedure is like atherosclerosis, a disease that gradually obstructs arteries. Cash flow is helpful for the hassle-free operations of your business. But, too much inventory, on the contrary, could lead to a premature demise.

Therefore, if you are thinking about solving cash shortage, inventory assessment and limitations are necessary. Monitoring your daily sales activity can bring precious information, guiding you to forecast future sales and modulate inventory more precisely.

Consider Various Borrowing Options

Are you fretting about how to solve the cash shortage? Funding is the best strategy to vanquish a cash flow crisis immediately. Are you inclined to caveat a loan? Various business owners worldwide often prioritise this short-term finance.

With this top-notch business loan, funding will be available to you after a few days of application. Lenders of Australia can provide not only caveat loans but also other types of business loans too. It’s essential to fathom the interest rates before you take out any loan.

Also, make sure that you are dealing with a genuine lender and not a fraudster. It’s always inevitable to find yourself a reliable lender and restraining yourself from getting caught in enormous debt.

Modify your Business Plan to Boost Profit Margins

Prolonged suffering from cash flow shortage might lead you to mindfully examine your business plan, operations, expenditures, and operations. You have to understand why your business has encountered this crisis.

If the reason is a recurring issue, you will have to develop a robust plan to tackle future cash flow shortages. Now, it’s essential to look at your business’s profit margins in terms of individual categories, including clients, jobs, products, services, and marketing strategies.

After a thorough lookup, you could be able to determine which business areas are most and least profitable. Once you fathom all these, you can readjust your business plan to focus on the most profit-generated services.

Minimise Non-essential and non-strategic Expenses

You are the one who is accountable for all the business expenses, and those must be spent thoughtfully. This statement is correct when you are devoid of cash flow management strategies. During this hardship, you have to cut non-essential expenses and prioritise your business condition.

Removing non-strategic or unnecessary cash outflow will be a prudent decision you have ever considered in this situation. Therefore, all the business expenditures should only focus on the operational costs, which can help build revenue.

Sell Non-essential Assets

If you have any non-essential office furniture or unused equipment, liquidating those assets could be a temporary solution to solve cash flow crises. This strategy will be helpful for your business to add sufficient cash flow. Your overwhelming thoughts might restrain you from selling those, but remember, you can purchase those later again.

Secure Credit

It’s always vital to be vigilant while providing credit. One of the best cash flow management strategies would be to conduct a credit check on brand new customers and consider asking for references.

Therefore, run a Dun & Bradstreet report on them and request them to fill out a credit application. Simultaneously, keep checking for various references, and never forget to consider accepting credit cards payments too!

Preserve Cash

Always keep your eyes on big purchases. Therefore, scrutinising your purchases will help you solve cash flow crises. You may also consider making instalment payments if you want to fight against cash flow crises within your business.

Concluding Words

A business might drastically shatter if there is no contingency plan for tackling cash flow shortages. Hopefully, this article has illustrated the top 9 cash flow management strategies to cope with this situation.

So, all the business owners and leaders should be ready to indulge in taking corrective measures and cumbersome decisions. Apart from these 9 best strategies that help stabilise cash flow, preparation and prevention are the two best-in-class practices, which all business owners and business accountants must abide by!

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