2020 has been a challenging year for small business owners in Australia and the UK. It’s important to mark your successes while recovering from the hard work that got you and your team through this difficult year.
However, there’s another problem looming on the horizon, and we know it may be keeping you up at night. Although 2021 is bound to bring plenty of benefits to your business, it will probably start off a bit slow between January and March. That presents some additional challenges with regard to cash flow.
Here are three steps you can take today to help your business survive a cash flow crisis.
#1 – Find Ways to Reduce the Money Going Out the Door
Negotiate your payables. If you have good, long-standing relationships with vendors, then they might be willing to work with you on postponed or reduced payments. Utility providers may also be willing to help you out. Even if you only receive a small reduction, every bit counts when jobs are on the line.
Next, you need to slash expenses. Put a freeze on all non-essential spending. Re-evaluate your business plan with an eye on profit. Let go of clients that are costing you too much money. Optimize your pricing structure to bring in cash today. Identify areas of waste, such as software or other expenses, that aren’t being utilized or contributing to profit generation.
Most importantly, ask your employees for help before it gets dire. When they realize it’s their jobs on the line, they will be extra motivated to help you look for other expenses to cut. It’s okay to be honest with your team about the challenges you face. Most employees would prefer to see transparency than surprised with a notice that they are being fired.
#2 – Find Ways to Increase the Money Coming In
Accelerate your receivables, with a special focus on past-due accounts. Send invoices as early as possible. Even better, ask your new customers for deposits or partial payments upfront. You can also try selling non-essential assets, such as products and materials that you simply don’t need at the moment.
All of this can help bring in a bit of cash sooner rather than later.
If all else fails, consider raising investor capital or even borrowing some cash, if necessary. For confident business owners who just need a small sum to tide them over during the slow months, this could be an appropriate cash flow strategy. Just make sure you consult the proper advisors before taking on additional debt.
#3 – Set Up Regular Money Management Meetings for Yourself
Keep an eye on your balance sheet regularly by scheduling frequent money meetings. This can be a time that you set aside with yourself, or it can be a team meeting with other trusted colleagues. Review your spreadsheets regularly and commit to consistent cash flow forecasting that tracks key performance indicators.
If you’re on top of your balance statements, then you won’t be caught off guard by a cash flow crisis. It’s a lot easier to deal with the problem when you see it coming. This has been a difficult time for many small businesses, so there’s no shame in reaching out for advice.
Reach out to book a consultation, and let our friendly team at Hemisphere Accounting simplify things for you. We’re committed to your success, and we have the financial expertise and virtual CFOs to make it happen.