It’s every small business owner’s worst nightmare: diminishing cash-flow. Whether it’s customers not paying their invoices or one of the many scams affecting Australia, not having enough funds on hand can cripple the day-to-day operations of your business. Luckily though, there are a few things that you can do to avoid this cashless blues.
Ask suppliers for extended credit terms
Suppliers understand that every business has cash flow problems from time to time and most are quite willing to negotiate terms that mean they are guaranteed payment. Try to extend the credit terms for as long as possible or spread out payments over a longer period of time.
However, it’s important to bear in mind that a delayed bill is NOT a bill that has gone away. Your supplier is in business too, and you don’t want to put them in the same boat you are in right now.
Take out a short term loan
A short-term loan could be the ideal solution if you’re simply waiting on invoices or bank transfers to come through. It’s quick, painless (except for the moderate-to-high interest rate), and it won’t affect your credit rating. Best of all, if you have a poor track record with credit, you can still borrow. With this type of loan you get your cash in hand almost immediately so if you have to pay your staff soon, this could be a real lifesaver.
Encourage early payments
Okay, there are chances that late payments got you into this mess in the first place. So why not try to encourage your customers to pay early or at the very least on time? For those that pay early, you can offer a small discount on future purchases. Not only does this entice them to pay you on time but it encourages repeat business. That’s a win-win if ever there was one.
Stop being so nice
Now, we’re not suggesting that you stop being nice altogether. But if customers or clients owe you money, you need to let them know just how dire a situation they’ve put you in. There’s no need to be mean but don’t worry too much about their feelings.
Pick up the phone and give them a gentle reminder that their invoice is overdue. You’ll find that actually speaking with the customer or client works much better than sending an email. There’s a lot to be said for the human touch.
Keep on track with accounting software
There are hundreds of tools out there that will help you keep track of your accounting so make use of them. If you can, try to use software that not only tracks your accounts but allows you to send automated invoice reminders to your customers and clients. These tools pay for themselves in the long-run, and if you can’t afford one right now, there are plenty of free options out there too.
Be prepared
This may not be the ideal piece of advice if you’re already in the midst of a cash flow crisis, but we’re going with it anyway. You should try your best to prepare for eventualities such as a cash flow problem by having an emergency fund available that you can dip into.
A certain percentage of the company profits should go into this fund every single month. Even if it’s just a few hundred dollars at a time, it could mean the difference between paying the electricity bill and shutting up shop.
Whatever it was that caused your cash flow problem doesn’t matter, the most important thing is that you don’t panic. As you can see, there are plenty of ways to deal with a lack of funds. But if none of the above work, then talk to your partners, your bank, and even your employees. You’ll find that if people know what’s going on, they can be extremely understanding and perhaps even offer a solution. Cash flow problems are temporary, so remember what we said; don’t panic.
