Proper cash management is probably the most important skill for any entrepreneur to possess, yet, there’s no singular success formula that you can look up to in any given situation. While experiencing growth, spending a bit more might give an amazing ROI further down the line. Even if you can’t justify this excessive spending from the point of infrastructure, doing so might bring benefits to the image of your company, which is an investment of its own kind. In moments of crisis, on the other hand, you need to take a more cautious approach. Here are some suggestions and ideas.
Identify the cause of the problem
The first thing you need to do is understand what caused the problem in the first place. For instance, a major customer that hasn’t paid in time or at all, a rise in the cost of production or too rapid growth of your business and the inability of your infrastructure (or your re-investment fund) to keep up. Apart from this, your sales might start turning somewhat lower than what you’ve predicted or anticipated, thus making a shortage in the cash flow. Finally, there might be some unexpected expenses that you’ve failed to predict in your initial estimates. Knowing what the problem is might help you fight it.
Imagine having no money at all
Even in the moments of the greatest crisis, you still have some funds to work with; however, what would happen if you had to run a business without any cash whatsoever? Sure, in practice, this would be completely impossible, yet, it’s an interesting notion worth considering. In that case, you’d have to come up with completely cost-free business practices when it comes to marketing, employee management and customer incentives. Then, imagine if you had some resources (always fewer than you actually do have) and look into new options that would open up for you in that particular situation. Some of these techniques can be implemented right away.
Provide some additional funds
The next problem you need to understand is that no matter how reluctant you are to get deeper in debt, most methods you need to start implementing require a resource investment. This is why you need some additional funds. Creating a side-source of revenue is out of the question seeing as how it may take a lot of time, while selling an asset is too risky because no one can offer you the assurance that the effort you make will actually work.
The perfect solution lies in the idea of caveat loans which are a faster and more flexible loan option. When we say flexibility, we mean that they can be as low as $1,000 and be paid off in as little as one month.
Secure internal funds
Another method that you have at your disposal is the one regarding internal funds. For instance, you might still have some supplies in stock and selling these might be enough to cover some of your current needs. This would mean that instead of looking for a loan or coming up with new cost-free methods, all you’d have to do is find a new sales pitch or offer a particularly compelling discount/limited-time offer. Apart from this, you could also sell your invoices to a factoring company, downgrade your corporate vehicles or ask suppliers to take back excess stock. Each of these methods has their advantages, although, they aren’t without downsides either.
Reduce your overhead
In most scenarios, the reason why your business is in such a bad financial shape is due to the fact that your overhead makes it difficult for you to generate profit. The best way to handle this is to look for a way to reduce it. You can start renegotiating with your suppliers, adopt more efficient business practices, consider alternative utility companies in the area, cancel your landline and much, much more. The key thing lies in figuring out which of these changes don’t reduce your productivity. Otherwise, the ROI might not be as high as you would expect.
The last thing you need to remember is the fact that these crisis cash management tips aren’t universally useful, same as they aren’t specific to a single type of situation. This means that once you’re out of the woods, you’ll have to abandon some of the above-listed methods in order to set out on a path of a greater prosperity, while some tips may be worth keeping. Remember, a moment of crisis is not something you’ll encounter only once over the course of your career as an entrepreneur, so any crisis you manage to overcome leaves you better prepared for the next one.