You’re looking at your projected cash flow numbers, and it’s not a pretty sight. You’ve got some payments coming in over the next couple of weeks, but some of them are 50/50 at best. At the same time, you have a stack of expenses knocking at your door.
Many small business owners have been in this position at some point or another. Apparently, a cash flow crunch presents a significant challenge that only a few manage to overcome. In fact, a study found that 82 percent businesses that fail do so due to cash flow issues. Hence, it’s always a smart move to make long-term plans to tackle rocky times.
Fortunately, there are measures you can take to survive a money squeeze, and they don’t involve turning in your assets at the bank or selling sofa cushions to scavenge for some change. Here’s what you need to do:
- Have Emergency Back-Up Funding
You can take steps to secure a loan long before using the borrowed funds. Having upfront capital can help you survive emergencies and leaner times much more efficiently. For instance, you can use the incoming cash to purchase equipment that enables you to improve your operations and generate revenue. However, a lot of small businesses think it’s hard to get financing, partly because they’ve heard horror stories of applicants being rejected by conventional institutions.
Fortunately, non-traditional lenders like the Lending Club are helping to fill the gap in business loan alternatives, with a straightforward loan application process, low monthly payments, fixed predictability, and zero repayment fees. Companies that are using these alternatives are moving from high-interest debt into simple, transparent monthly payments and freeing up cash flow to run and scale their business.
- Improve Your Payment Collection Process
Don’t consider your accounts receivables as payments until your debtors clear your invoices. If you’re unable to manage payroll and other responsibilities, it will significantly hurt your business. Hence, it’s crucial to take steps that’ll improve your collection process. For instance, you can instruct your finance department to invoice promptly.
If they take a few weeks to send the invoice, don’t expect it to be cleared in a timely fashion. Work with them to create an invoicing goal, and be consistent with it. Another thing you can do is encourage down payments. If someone has incurred a hefty bill, tell them you’re willing to start rendering services as soon as they pay half of the invoice, and consider offering discounts to those who pay upfront.
- Sell Uncritical Assets
Remember that equipment you purchased two years ago because you were going to introduce a new product line? And the plan didn’t get off the ground, so now the equipment is sitting in your storeroom, seldom utilized? Can’t you sell it? Okay, maybe the scenario doesn’t apply to you, but there’s a likely chance that you have an item of value to sell.
Maybe it’s a computer array. Perhaps it’s machinery accessories. You might even have an unused vehicle. Review your assets to identify things that are not critical to your business but value that can be sold to other companies. The key is to ensure that it’s priced to the move. Put a premium on quickly closing the transaction rather than holding out for top dollar.
It may appear challenging to fund a small business, but you have more options than ever before. Investigate each before deciding on what route is suitable for you.