All businesses will experience a cash crisis at some point in time. There is just not enough cash to pay all your bills. What to do now?
Addressing a cash shortfall should be done early and honestly. How the crisis is managed will determine the outcome - good or bad. The steps taken or not taken will affect the reputation of the company and the management team. Relationships will be affected with employees, vendors, and bankers. And ultimately the decisions will determine if the business will even survive. It may sound dire, but only if the situation is ignored. The good news is that there are several quick steps to take to improve the cash crisis right away.
Become a Spending Disciplinarian
Cut out all unnecessary expenses. For every expenditure ask the question, "will this get another customer?" Does a piece of equipment really need to be replaced or can it be repaired? If equipment does need replacement, can it be bought used? Is a new vehicle necessary just because a the current lease is up?
Ask Every Employee
No one knows the job better than the people actually doing the job. Ask employees for suggestions on increasing efficiency and reducing waste. Create a monthly reward program for the best cost-saving ideas.
Think Green
Save on the electric bill by turning off lights when not in use, shut down computers at night, adjust the thermostat at night and on weekends. Set printers and copiers to automatically print double-sided.
Be Aggressive About Collecting Cash
Don't let customers delay their payments. Try to get customers to pay on-time or even early. Offer discounts for paying early. On the day the bill is due, if payment hasn't been received, call the customer and ask them when payment can be expected - get a specific date. Continue making regular calls until payment is received - remember the expression, "the squeaky wheel gets the grease!"
Send Invoices More Frequently
Instead of sending customers an invoice at the end of the month, consider billing every week or even every day. It might be more work but it will speed up when payment is received.
Make Deposits Daily
Don't wait until the end of the week to make the bank deposit. Take the time and make a deposit every day that payment is received.
Talk to Creditors
Calling in advance and asking for an extension of the due date is better than having to explain why the bill hasn't been paid. The phone calls are hard to make but they will maintain business integrity and reputation. Work out a payment plan, but make sure the new commitment can be met. Honesty is better than making promises that cannot be kept.
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