World Executives Digest money | One of the most important metrics that speak of the success of your business is how well you manage your cash flow. It’s often more important than the assets you have at your disposal or the savings you have in your accounts.
Short-term cash flow problems are, therefore, a serious issue. If your business relies on steady payments and you lose them, the company as a whole may be in danger. You need to have a plan put in place to deal with such issues.
Keep track of your expenses
There are two sides to every cash flow statement – one dealing with the money coming in and the other, dealing with the expenses made by your company. Obviously, it’s the second part that you have the most control over, and that’s where you should make the cuts if you’re short on cash.
It’s best to categorize your spending based on how important it is for the business as a whole and how easily it would be to scale back when needed. This is will give you a structure to work with when you need to deal with a drop in the cash flow.
Borrowing money
At the same time, you should consider borrowing money when you don’t have enough to cover your needs. This is more complicated than it seems because borrowing from a bank usually takes a while, but when you have a cash flow problem, you usually can’t wait that long. It’s best to use no credit check loans as an emergency option. These loans aren’t affected by your credit score and are best used for small amounts.
As is the case with all loans, it’s best to borrow a bit more than you actually need and thus cover the unplanned expenses.
Invoice collecting
Invoicing is the process of collecting the payments that need to be made towards your company. At any given time, you’re going to wait on one payment or another. It’s important to establish a system for collecting these in an orderly manner, but also to have a system for dealing with late payments.
This doesn’t have to be a complicated system nor does it need to involve a bank at all. Sometimes, it’s enough to send a strongly worded letter that will state how important it is to get your payment on time. In the end, you might need to have a policy when it comes to asking the company that owes you money to declare bankruptcy or make the payment.
Negotiate with creditors
There are ways to mitigate the problem once it becomes obvious that you won’t be able to make your part of the payments. You should set up a negotiation with your creditors. If your record is fine, there’s probably a chance creditors will be willing to wait.
Sometimes this means that there will be additional fees, but that’s usually a better way to go than simply not paying your bill on time. The willingness to negotiate on the matter shows that you respect the other parties involved.
Review
Cash flow very much depends on how much you’re willing to work to set up a system. It should be used to track the expenses and the income you get within a given month and to make sure that your payments are made and collected on time.
Take the time to perfect this system by reviewing it on a regular basis and by making changes where they need to be made. That’s often a long and costly process, but it ends up saving you money in the long run, since it provides options when things go wrong.
Cash flow problems may come up every once in a while and you need to have a solution prepared for the situation, if it happens. It’s best done by being able to scale back your business for a while and borrow more at the same time.
