If you are experiencing a cash flow problem you don’t need to bury your head in the sand, there are some things you can do that will bring you some instant relief to your cash flow problem. So here are 5 clever tricks to instantly improve your business cash flow problem:
1. Build A Cash Flow Forecast
Grab a spreadsheet and start building a cash flow forecast, it’ll be a reality check. Give yourself clarity on what needs to be paid and when, when you expect money to come in and then make a plan as to how you will manage your cash flow. Numbers don’t lie and by writing them down you can start to make real decisions on how you manage your cash flow problem (as well as ease your stress levels).
2. Do An Expenses Audit
This is a fancy way of saying run through all your payments and check whether you really need them. Some cash flow problems arise simply due to over spending, with overhead costs eating into gross profit margins.
Check your bank statements, company credit card and and your latest management accounts to find clues as to where you are spending money unnecessarily. Savings after all translate into cash in the bank.
Common expenses we all ‘forget’ about tends to be things like ongoing subscriptions, which can be cancelled instantly generating an immediate saving. Another area to review could be the processes for managing staff expenses and their effectiveness – team members are spending money on things the business either does not need or not achieving the cheapest costs.
You can also think about your upcoming costs and consider holding off any major spending. For example if you are about to upgrade all your computers you could hold off until cash returns to a better position.
3. Re Negotiate Your Supplier Payment Terms
If you have ongoing relationships with suppliers you could consider speaking to them about your situation and negotiating a longer time to pay or staged payments which could give you some well needed breathing space.
4. Speak to Your Bank Manager
Believe it or not your bank manager is there to help you. If you are experiencing a short term cash flow problem, you should call your bank manager to discuss it with them. Not only do they have experience of these situations that you could benefit from, but its also in their interests to see their clients succeed.
An alternative to approaching your bank manager is to seek out other forms of short term lending or loans but I would definitely advise you seek professional advice before committing to anything of this nature. A cash flow problem can sometimes be the symptom of a major issue in the business so signing up to a loan will only create a short term fix but leave you with a long term financial burden you may need to repay personally.
5. Credit Control
Run your trade debtors ledger and see who owes you money. I’ve so often see business with a cash flow problem and when I have reviewed the accounts seen unpaid invoices which is where the problem lies. Get on the phone to your customers, remind them they owe you money and ask them for payment, if you hold a really good relationship you may be able to get your payment rushed through, especially if your customer is very late with paying you. Believe me, most of the time they wont know you haven’t been paid and will be embarrassed to know that you haven’t been paid. Alternatively offer some an early payment discount for settling their invoices as quickly as possible.
Just be careful when you do reach out to your customers you don’t worry them about your businesses financial status because that could impact your relationship going forward.