Written by Warren Sager
Cash is king.
During this unprecedented time, we as small business owners, need to do everything in our power to protect our businesses and take care of our families. One of the best ways to ensure your business survives is to protect your cash. In tough times, cash is king. Credit will be tightened during a recession so cutting expenses and improving cash flow should be a business owner’s focus.
There are four fundamental ways that you can increase your cash position to ensure you stay in business.
1. Reassess budgets
Review the cost of items and make difficult decisions fast. “Which costs can we eliminate in order to extend our cash runway?” Review every penny you spend and eliminate anything that isn’t core to your business. Cut fast, hard, and early.
Unfortunately, in many companies the greatest cost item is payroll. It is important to make the hard decisions on laying off staff sooner than later. Before emotion plays a factor, make decisions on the order in which you will lay people off, and set the financial benchmarks that will trigger decisions. Share this with your #2 and be sure that they hold you accountable.
Which scenario would you rather have? A 1-2 month layoff and then bring everyone back to work or a bankrupt company with nobody having a job? I know it is hard, but desperate times call for desperate measures.
2. Collect your accounts receivable faster
Call every client 5 days before an invoice is due, using the most charming and disarming person that you have.
Most companies have a lot of cash tied up in receivables. Now is the time to tighten up your processes and make sure you get paid. Call, email, and remind all your customers that owe you money that you need to get paid in order to stay in business.
3. Disperse your accounts payable slower
You need to keep as much cash as possible in the business. Every dollar you pay out now is a dollar you don’t have.
Pay everything with a credit card that you can. Negotiate more favorable terms with suppliers.
Call every vendor and explain times are tough... “What can we do”?
Stop or partial pay AP if things get desperate.
4. Consider new ways of doing business
Do you have a barter/trade exchange in your area? Bartering has historically been a great way to do business and save cash during tough economic times. Wouldn’t you love to purchase the things you need with the value of your business products and services instead of paying cash? Many trade exchanges also issue no interest lines of credit to help with purchases. Joining and utilizing a trade exchange is another great way to help protect your cash. Find a Moxey trade exchange network in your area. www.MoxeyUSA.com