Sometimes life doesn’t go to plan, and given more than 60% of Australian businesses fail within the first three years it’s safe to say most businesses don’t go to plan either. So what do you do when your business falls into a cash flow crisis? Luckily, there are a few last-ditch efforts you can make to dig yourself out of the hole before you decide to call it your grave.
1. Create a realistic cash flow forecast to use as a plan
If you’ve found yourself in cash flow trouble the first thing to do is create a plan to get out of it. An effective cash flow forecast will cast an eye over your history to help predict your financial future.
When creating your forecast, make sure to specifically identify what it was that got you into this position. How could you prevent or anticipate this happening in the future? You can use your past mistakes as information with which to build a better understanding of the nature of your cash flow. Being realistic in your estimates will strengthen your forecast and give you a clear idea of how you’ll get back to a positive cash flow and how long it will take you to get there.
2. Meet with your bank
Though you might find the idea a little embarrassing, if you’re using loans in your small business it’s important to bite the bullet and communicate with your bank if you’re having any issues. Through keeping them in the loop with your issues, you may be able to renegotiate your rates. And if you can show them your cash flow forecast of how you’ll be able to get out of your current situation, as your lender, they’ll feel more confident in you.
Your bank manager will appreciate your honesty and being forthcoming will be met with the patience you need. At all costs you need to not miss a loan payment.
3. Cut your own wage
Your staff salaries should be the last to be affected. If you can survive it, a quick way to improve your cash flow is to temporarily reduce your own wage. The reduction can be made in the style of a loan, where you intend to pay yourself back the lost wages once you’re back on your feet. Alternatively, you can look at your forfeited wages as an investment in the stability of your business.
4. Shift your inventory/services
If you’re in need of a big helping hand, do what you can to sell your goods and services at a faster rate than you normally would. If it means running a limited-time-only promotion or adding extra incentives to your sales team for a period, then so be it.
To help keep a close eye on your cash flow, try out the Reep free trial. With live access to your financial data, Reep creates cash flow forecasts updated in real time.