With inflation at a full gallop and supply chain shortages/ delays still causing long waits and price increases on many goods, depending on your business, you may find that cash flow is more of a concern than you anticipated. As you know, cash flow is essential to operational fluidity but it isn’t the only marker of your company’s success. If you’re experiencing cash flow uncertainty, don’t panic.
When your aging Accounts Receivable are squeezing your ability to conduct business, here are 5 action items to address the situation, ride out the temporary cash flow issues and come out the other side older, wiser and ready to address cash flow forecasting so this never happens again.
Ask for what you need. If you estimate that you need another 30 days, call your creditors and ask for extended terms. They are business owners too and may be willing to waive late payment fees this one time. (note: this is not a good recurring strategy)
The first line of defense in the face of a cash flow issue is to tighten your belt. Hold off on as many payments as you can until your bottlenecks are released and you are more flush. This does not apply to paying your staff, they are non-negotiable.
Most of the people you do business with understand the ebbs and flows of liquidity. If you find your aging AR is negatively impacting your ability to do business. Tell your clients. The truth is compelling and some clients will rectify overdue accounts if they know how much it matters to you right now.
If you have played your cards right, you have a great credit score and now may be the time to use those credit cards to pay your suppliers. Balance transfer offers are a great way to move debt strategically and stave off interest payments by a few months.
You likely have a relationship with a business banker. Many business bankers are able to provide shorter-term loans to cover cash flow issues in times of need. This is why relationship banking is so important. If you do not have that kind of banking relationship there are alternative lending options that can use your AR as collateral for a loan to tide you over.
Taking the time to do proper cash flow planning helps you stay one step ahead of these problems. Building an accurate cash flow forecast will help keep your business operating smoothly, and you’ll sleep soundly at night.
Want a guide to cash flow forecasting? READ ON…
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