Handling A Cash Flow Crisis
I have been through cash flow issues over and over, so I thought I would share some of my wisdom. I mean, where do you get cash when it seems like there are no options?
1. A cash flow issue is a problem
Consider your cash flow issue a problem and work to define what your problem actually is. For instance, I know that I don’t receive any income until September. What bills must be paid before then? Perhaps you receive a variable commission and you think you’re going to be short. Unless you can work through the numbers and find out when your problem starts and what amount will cure it, you will never be able to find a solution.
2. Planning is never perfect
While you can guess your receipts and when they will come, some may be short, some may be late, some bills may be larger, etc. so you must build in a small margin if possible.
3. Revise your plan as you get actuals
As you get receipts or pay bills, update your plan to reflect any changes. If you fall more short than expected, you must come up with more of a solution.
4. Paying late is not the end of the world
Almost all bills can be paid a day late. Some can be paid a month late. Evaluate what you think you can drag your feet on and adjust your plan accordingly. Talk with your creditors if you must and let them know what’s going on. If you are paying significantly late, this would be a great idea.
5. Brainstorm some ideas for improving cash flow
So you’re still short? What can you do to raise some cash? Consider all options, even if you really don’t want to use them. Think of ways to delay payments or quicken receipts. Ask the bank for money. Use factoring if possible. Does somebody owe you money?
6. Implement your top ideas
See if your top ideas are feasible and add them to your plan. See where you stand now. Brainstorm again if needed.
7. Work for the long term
Once you have gotten through your crunch period, look for long-term solutions to improve your cash flow permanently. Is your margin too low? Are there expenses you should cut?
8. Expect the next time to be even worse
If you get through this cash flow issue and take no permanent corrections, expect next time to be worse.
Let me know if this advise works for you by commenting.