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In this article, we’ll explore short-term solutions that you can turn to when facing cash flow shortfalls:
Reassess Your ExpensesWhen faced with a thin supply of cash, it’s important that you decide what spending priorities should come first for you. Separate your expenses into essential and non-essential categories, and temporarily suspend or reduce non-essential expenditures. For instance, delay upgrades or equipment purchases that aren’t immediately necessary.
Negotiate with SuppliersIf you have a decent working relationship with your suppliers, they would rather offer a temporary discount or extended payment terms than lose your patronage. So it certainly makes sense to find out what allowances they could provide you with. Try discussing your current situation with them. They might be willing to give you a break, especially if you’ve been a reliable client.
Speed Up InvoicingSlow billing is often a big drag on cash flow. The quicker you bill, the sooner you get paid. You will want to ensure that your invoices are sent out promptly, so you can collect them in good time. Also, consider offering small discounts for early payments.
Consider Short-term FinancingYou could seek alternative sources of finance when the cash coming into your business tapers out. For instance, you could ask for short-term loans, which are traditional loans with terms of less than a year. They are typically quicker to obtain than long-term loans. You may also request lines of credit or invoice financing (which is drawn against your outstanding invoices).
Liquidate Non-core AssetsSelling off assets that are not central to your business’s core operations can bring in a quick influx of cash. This might include surplus equipment, vehicles, or even property. This may seem like a desperate move, but it would be a reasonable thing to do if other means of obtaining financing fall short.
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Offer Discounts for Quick SalesIf your business sells tangible products, offering a time-limited discount can attract more buyers, bump up sales, and quickly increase the value of cash coming into your enterprise. Just be sure that it doesn’t come at a great cost to your business’ medium and longer-term financial state.
Tap into Your Business SavingsIdeally, you will have set aside some cash reserve as a ‘rainy day fund’. Such savings will come in handy when the money coming into your enterprise shrinks to a trickle. However, ensure you have a strategy to replenish it when circumstances improve.
Adjust Payment TermsShortening your standard payment terms for clients can speed up cash inflows. Instead of allowing 30-day terms, for example, consider reducing them to 15 days for a while.
Prioritize CollectionsIf you have clients with overdue balances, intensify your collection efforts. This could involve sending reminder emails, making phone calls, or offering payment plans for large outstanding amounts. A prolonged and persistent drive to gather such funds will likely yield a fair bit of cash that your business could use.
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Lease Instead of BuyingIf you’re considering a significant purchase, like equipment, consider leasing as an alternative to buying. Leasing requires less upfront capital, so it preserves scarce cash. It’s true that leasing will cost you more if drawn out long enough, but the idea here is to only go with it for a short while.
Final WordsCash flow shortfalls are a common challenge for businesses, but they don’t necessarily signal the end. With quick action, strategic decision-making, and a willingness to make temporary sacrifices, you can navigate these turbulent periods successfully. Featured Image Source:
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