5 North Bethesda Business Strategies to Survive a Cash Flow Crisis

5 North Bethesda Business Strategies to Survive a Cash Flow Crisis can be part of a vital plan for handling a dire situation. 82% of all startups will fail due to these shortages and crises. Strategy is key when you find yourself beginning to drown in the currents that come from money shortages. 

 Tweak Business Plan – Improve Profit Margin

The first thing you will want to do when encountering a cash flow shortage is to inspect your business plan.  Zoom in closely to analyze the processes, operations and expenses. Spend some time with your reports to help you determine the root problem and from there you can begin to strategize preventative measures to keep your business out of the red zone. 

Determining which areas of your business are the most and least profitable will help you adjust your business plan to focus on services and clients that generate the most revenue.  This process, known as job costing – uses the profit and loss statement and profit margins based on individual categories that are specific to your business. These categories might include jobs, clients, services, employees, events, marketing strategies and products. Job costing will also help optimize your pricing structure and identify areas of waste or unnecessary expense to remove from your operations.

Accelerate Your Receivables

The quicker money begins flowing into your business, the sooner your cash flow problems will be solved and the healthier your business becomes. There are many strategies to put you on the fast track to stop the bleeding inside your business. 

• Ask new customers for a deposit or partial payment up-front, rather than billing the entire amount due in a single invoice after services have been rendered or products have been delivered.

• Start sending your invoices early Adjust the management of your receivables to invoice clients immediately following the delivery of products or services, rather than sending out all invoices on a particular day of the month. The sooner you send an invoice, the sooner you will receive payment.

• Send invoices more frequently Instead of waiting for the full completion of a job to send an invoice, generate invoices every week or every two weeks to cover the services delivered up to that point.

• Focus on your past due accounts Scour your accounts receivable for past due clients and start making phone calls. You can ask past due clients for partial payments; in a cash flow crisis, every cent counts.
• Make it convenient for clients to pay by offering additional methods of payment, such as credit card, mobile or electronic payment options.
• Incentivize Pre-buying by selling discounted gift cards for a limited time.
• Begin a Referral Program by offering discounts or extra services for referrals.

Negotiate Your Payables

Reducing the amount of cash flowing out of your company during a cash flow crisis can most definitely be a short term, helpful tool to relieve some of the strain on your working capital. You might be surprised how accommodating your vendors can be when it comes to delaying or renegotiating payment.  Honesty goes a long way. At the end of the day, companies want you to succeed so they can continue to do business with you. Although some might be unwilling to budge, odds are vendors to whom you have been loyal will be flexible and willing to work with you during a tight situation. You will also likely be able to get some leeway or perhaps even a reduced obligation from your utility providers.

 Raise Investor Capital

You can also increase your business’s working capital by bringing on a new partner and selling equity in your company. Like taking on debt, it is prudent to be 100% certain that you really want or need to sell off a piece of ownership. Resist the temptation of taking the easy way out. Explore this strategy cautiously and thoroughly. Poor decision making during stressful times can make the bad choices the easy ones.  

Cut Costs

It’s a no brainer that in business, you should always scrutinize and account for every dime that leaves your bank account. It’s imperative to be especially critical of spending during a cash flow crisis. Prioritizing your company’s expenses and eliminating all unnecessary ones during a cash flow shortage is like putting a bandage on the wound while you explore exactly where the issue is.  

Once the bleeding has stopped, keep in mind that preparedness and prevention are two of the best practices to follow at all times to keep the cash flowing in and through your business. When it comes to being prepared, like anything else, you will need a plan that includes accurate and up to date financial statements like income statements, balance sheets and cash flow statements. Maintaining your financial statements on a regular basis ensure you always have your finger on the pulse of the financial status of your company. 

Your business’ profitability and operational efficiency are at the center of your business’ success!  Taking steps such as the 5 North Bethesda Business Strategies to Survive a Cash Flow Crisis is a positive way to keep your businesss’ cash flowing freely.  At North Bethesda CPA Accounting & Tax Services our experience, resources, and attention to detail make our accounting services second-to-none. As an experienced accounting team, we are available to help transform your business’ financials as we work with you to establish short- and long-term strategies for growth and profitability. Feel free to contact me and connect on Facebook and Instagram.