Keeping your cashflow strong in tough times
Small businesses are particularly vulnerable in tough economic times. When sales are slow, there are still overheads and salaries that need to be sorted. Pre-planning and being proactive can help you weather tighter economic periods and allow you to continue to thrive.
Make sure you have a clear picture of your payroll, and any other planned expenses that will need to be accounted for.
If there’s even a possibility that there could be a shortfall, it’s essential to meet this head-on. Whether this means talking to your suppliers or creditors to figure out an arrangement, or compromising on other business outgoings, you must make a plan to ensure that the business, or your staff, won’t suffer.
Minimise the stress of cash-flow
Invoice early - Send any invoices that you can, and in advance if possible. Perhaps consider whether you have any regular clients or customers that you could offer a retainer or similar deal to if they book services or make a purchase from you in advance.
Chase payment - Use this opportunity to chase up any outstanding payments. Strong communication and relationships matter - talk to clients and chase invoices, any bit of older debtors that you can get it will help cashflow. Even if that means offering some of these clients a payment plan to pay off the debt, rather than it potentially becoming a bad debt.
Talk to suppliers - A little honesty can go a long way. Perhaps they can extend a line of credit for your payments to them. In most cases, a good supplier would rather offer a little flexibility to keep an ongoing business relationship.
Review Inventory - Can you find a cheaper supplier locally to avoid the shipping costs or discuss alternative products that allow you to reduce expenses? Ensure you are not holding inventory that you don’t use frequently, trying to run your stock on hand as lean as possible in tough times can free up some much needed cashflow.
Review your costs - It’s also a good idea to do a general review of expenses. Business costs can creep up, and it’s a great idea to make a time to check on your expenses regularly, no matter what your financial situation. Review all of your regular payments and subscriptions as well as upcoming costs. There may be travel, functions or purchases which you can decide on an alternative approach to.
Talk to your bank or IRD - If cashflow is tight, make sure you have conversations early so you have everything in place to see you through, front footing these discussions can have a more positive outcome.