The success of every business can be traced to the steady and predictable flow of incoming cash. Without cash coming in then the business cannot survive over the long-term.
No matter what state your business is in today you must have a plan to improve your cash flow if or when things get tight.
There are many options to increase cash flow. Which one or ones will work for you depends on your business.
Let’s take a look at some options and the potential drawbacks or hurdles you may face.
Option #1: Increase your efforts to collect payment of outstanding invoices. Many small businesses have invoices that are hitting 90+ days. Remember you are not running a charity. Collect the money that is owed and collect it today. Every day it sits outside of your bank account it loses value.
What may happen: You do risk creating tension with customers who may be accustomed to lax credit terms. Long term you have to take the risk that you may lose some customers. The question though … are they the customers you really want or need?
Option #2: Contact your creditors and request an extension in your payment times. Of course you are now just like the customer we discussed above. So the risk is you could send a signal to creditors that your business is in jeopardy and they may decide to stop doing business with you.
Option #3: Liquidate assets. Get what you can for what you don’t really need. Most small businesses have assets that can be turned over for a quick increase in cash. Just remember that factoring could indicate to shareholders and others that your business is floundering.
Option #4: Seek additional funding. Do you have a strong relationship with your bank? Before the lack of cash hurts your business to a point that a bank will say “no” seek funding. If you have
investors it is time to take them to dinner.
Option #5: This is the one I love … go out and generate new business. If you believe in your product or service so much that you started your own business then get out there and sell, sell … SELL! As the owner or business manager you are the best salesperson you have. Get out from behind your desk and hit the streets. New sales means new cash …
What ever you do just make sure you do something. You cannot wait around for cash you have to go get it.