In today’s economy, it’s quite common as a business owner to find yourself strapped for cash. The drop in consumer spending and the fickle stock market has people and businesses nervous and conservative about spending at all levels. When business isn’t as predictable as it once was the availability of cash flow can be limited.
Even before you find yourself in need of cash, investing time in creating a cash gap plan in the event of a shortfall is time well spent. A gap in cash can happen for many reasons: bills are paid weeks before cash comes in from customers; working capital is needed to keep staff paid; new technology is required to keep abreast of the competition. However, there are ways to improve your cash flow situation that might, in turn, become standard operating procedures to help prevent a deficit in the future.
Depending on your business model, one thing to consider is reining in your receivables. It’s not uncommon to see receivables lag in a tight economy, however, some additional focus on keeping receivables low can help you increase your cash flow and working capital, in short order. Connect with the customer that hasn’t paid and give them a deadline. Incent your customers to pay on time with a discount or percentage off their next purchase. Negotiating extended credit terms to suppliers keeping more money in your pocket. Concentrating efforts on fast moving inventory, and or implement a just-in-time inventory model. And get cash out of customers through discount programs and credit card transactions.
With a little insight and planning, you can improve your cash flow situation and maybe at the same time upgrade your operating procedure so you will not find yourself on the short end of cash in the future. And the savy entrepreneurs know how to capture market share from their competitors in down economic times, therefore growing their top line as well.