Struggling For Cash Flow? Strategies For Survival During A Recession

Cash flow is king for any business in any industry. Without it, your business won’t be able to meet its daily expenses. Cash flow is the amount of money that goes into and out of your company on a regular basis.

It’s usually represented as cash (in) vs. expenses (out). The difference between the two is your company’s cash flow, also known as “cash surplus or deficit.”

With so many small businesses closing because they don’t have enough cash coming in to meet their outgoings, it can be difficult for new start ups to gain trust when applying for loans or grants. But there are ways you can work around this and keep your business running smoothly even in tough times.

Create A Cash Flow Forecast

A cash flow forecast is the best way to track how much money is coming in and going out in your business. This will help you work out if you’re likely to be able to cover your expenses for the month.

Start by listing your recurring expenses (such as rent, loans, and utilities) and one-off expenses (such as licensing, training fees, and marketing materials). Then, add your expected income from sales.

Next, forecast your cash flow by adding the amount you expect to receive from customers and subtracting the amount you expect to pay out in expenses.

If the total is a positive number, you’ll have cash left over. If it’s a negative number, you’ll need to find a way to increase your cash flow.

Use A Monthly Business Budget

Start by assessing your budget in relation to the revenue that you expect to bring in. These two factors will influence the amount of money you’ll need to spend on overhead expenses like rent, utilities, and payroll.

Your budget will also include your expected amount of new client acquisition spend and other marketing initiatives that are expected to increase your revenue.

Knowing how much money you’ll need to spend each month will help you figure out how much money you’ll need to bring in.

This is a practice that every business owner should get into as it will help you be more mindful of how much you spend and help you to track your expenses.

Utilize Your Financial Statements

Financial statements are basically a record of your company’s assets, liabilities, and equity. They can be found in the Annual report of an unlisted company or the 10K report of a listed company.

The balance sheet is a snapshot of your financial health at a given moment in time. It shows you your current assets and liabilities, and it also shows the difference between the two, which is your equity.

The income statement shows a historical picture of your company’s revenues and expenses over a period of time. It’s typically broken down into quarters or years. The income statement is an essential tool for investors who want to understand how your company makes money.

Identify Your Expenses

Next, we need to put on our accounting hat and start to dig into your expenses. The first step is to make a list of your fixed and variable expenses. Fixed expenses are those that are consistent each month, such as your utility bills.

Variable expenses are the costs that fluctuate from month to month, such as your payroll. Once you have this list, start to assess how you can reduce these expenses by looking for ways to cut costs.

Reduce energy expenses by changing your air conditioning settings or by installing energy-efficient appliances. Find ways to optimize your spending so that you can remain profitable even in tough times.

Accelerate Your Receivables

Receivables are monies that are owed to you and they’re listed on your balance sheet as a current asset. You can speed up the process of collecting your receivables by using a factoring company.

Factoring is where a third-party company buys your accounts receivable at a discount and then collects the full amount from your clients.

This allows you to access your money sooner than you would if you were to wait for your clients to pay you directly. So if you’re in need of a quick cash injection to help with your cash flow, consider factoring some of your receivables.

Maintain A Clear View Of Inventory

Working closely with your suppliers to make sure you’re always getting the best deal on inventory is crucial. Make sure that you’re aware of your supply chain and inventory management to help you keep track of your inventory and avoid unexpected costs.

Use a vendor management system to keep track of all your suppliers, monitor your outstanding invoices, and get alerts when payment is due.

This will help you to keep track of your inventory and avoid shortages. If you’re in the manufacturing industry, you might be able to make use of a material takeoff analysis to forecast your future inventory needs.

Access A Line Of Credit

A credit line is a type of loan that you can tap into when you need cash quickly. A credit line is also known as a “revolving credit” or “term loan”.

You can use a credit line to finance inventory, make payroll, or fund capital expenses. If you have collateral, you might be able to get a credit line without paying any interest.

Credit lines have to be repaid within a specified period, but they’re typically quicker than other financing options. If you have a relationship with a bank, you might be able to negotiate a quick line of credit to help you with your cash flow.

Review Your Finance Options

When you’re struggling for cash and need a quick injection of capital, your first thought might be to borrow money. But there are other options that you can explore before taking out a loan.

For example, you can try to find an investor or sell some of your equity in your company. You can also try to raise funds through crowdfunding platforms like Kickstarter or Indiegogo.

However, you’ll likely have to offer some type of return on investment (ROI) in exchange for the funds that you receive from these sources.

Monitor Your Cash Flow

As you’ve started to track your expenses, forecasted your cash flow, and explored ways to reduce your expenses even further, you’ve probably noticed a trend: You need more cash! But where do you get it? You start by getting to know your customers and clients better.

This will help you to identify your ideal client so that you can focus your efforts on finding more people like that. You also need to know your vendors better.

This will help you to negotiate better rates with your suppliers and find the best deals. You also need to understand your finances better.

This will help you to forecast your cash flow so that you know when you’ll need to find more cash. And finally, you need to make sure that your invoices are paid promptly so that you have the cash you need to keep your business running smoothly.

Summing Up

Cash flow can make or break a business. Managing your cash flow effectively can help you fund your business, keep your vendors satisfied, and avoid financial problems.

Be sure to review your finances regularly to identify when you will need more cash. You can then explore ways to generate extra cash, such as finding new customers or negotiating better rates with your vendors.

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