Cash Crunch Remedies

No matter the size of the business, it all comes down to how well you manage what you have. Cash management is one of those things that you have to get right. Here are my top tips for managing and improving your cash position when cash is tight.

1. Only pay what you can afford – With overdraft fees running over $35 a pop, it makes no sense to pay avoidable bank fees, especially during a cash crunch. If you cannot afford the expense and it is a necessity to keeping your business running, work with the vendor to delay payment rather than further irritating the vendor with a bounced check.
2. Lower expenses – Look at all your expenses and eliminate or cut down items that will not impact your customer or staff goodwill. Start with large expenses and work your way down to the smaller items.
3. Renegotiate everything – Review your existing contracts to make sure you’re not being overcharged. If contracts are at or near renewal, be open to new bidders. Examples include telephone, leases, equipment rentals and so on.
4. Extend payment terms – Reach out to lenders and renegotiate payment terms including interest rates for those of you with excellent credit and monthly payments. Do not be afraid to ask for a no payment period or reduced payment amount for a specific time period, say six months, with interest and principle tacked on to the end of the loan. This is a really inexpensive way to fund a project that would increase the revenue to your business.
5. Increase sales – Get rid of slow moving inventory by selling it to customers at a discount via a sale. Cash is king and old product sitting on a shelf is not doing anything to help the business and its cash position.
6. Do not invest in new products – When cash is tight, it makes no sense to invest in something that is unproven. Reinvest cash in items that are proven to generate lots of cash to get the business out of the danger zone.
7. Increase customer retention – It is cheaper to keep a customer than to acquire a new customer. Former customers are already familiar with your brand. Always have some part of your marketing budget set aside for customer retention such as birthday discounts and customer appreciation events.
8. Cash collections – Poor billing and collection practices can quickly make your business cash poor. Make sure your billing is timely and accurate. Make sure to pursue past due bills. Some customers will not pay until they receive a collection call. In other words, the squeaky wheel gets the oil.

Implement these tips in your business and you will be well on your way out of your short-term cash crunch.
By Loftis Consulting