You might be wondering how you’re going to pay your team or cover important bills. With your bank account stretched, plans for essential new equipment or important building maintenance will have to go on hold, too. It’s frustrating and can feel like you’re trapped in the cycle. Plus, a lack of cash means that you might not be able to afford the things that could set you back on track.
Even when things look bleak, remember that there is a light at the end of the tunnel. It is possible to survive a cash flow crisis. You just need to know what steps to take when the money runs dry.
Chase up what’s owed to you
One of the greatest causes of a cash flow deficit for small business owners is late payments. This is such a widespread issue that new legislation has been passed to tackle the problem, with ministers proposing a series of measures to eradicate the ‘scourge of late payments’.
While those incoming changes won’t help you right now, you can take a proactive stance by chasing up everything owed to you that’s past due.
- Call rather than email in the first instance
- Be prepared to offer a range of payment methods to collect what’s owed to you
- Offer payment plans where needed to claw back some of the funds owed
If you don’t already have it written into your purchase agreements and displayed on invoices, add a note that late payments will incur a late payment fee. Specify a timeframe after which unpaid bills will go to a collection agency. Often, a simple reminder that the invoice cost will go up if it isn’t dealt with is enough to prompt at least a partial payment.
Introduce new payment terms
If you don’t require a deposit payment upfront from clients, now is the time to consider it. This brings cash into the business now, while also helping to offset some of the repercussions of late payments further down the line. Normally when you’re providing goods or services, you’ll absorb the cost initially and then recoup that money when your invoice is paid. With a deposit system, some of that pressure can be alleviated and you don’t risk being left out of pocket by a late or non-payment.
Suspend non-essential subscriptions
If you have software subscriptions, it’s likely that you’re paying more than you should. Research indicates that 41% of small businesses are paying for subscriptions that aren’t ever used. Just under half say that because they’re relatively small payments, they’re overlooked and allowed to run on. Others admit that subscriptions are left to auto-renew. This could be costing you hundreds of pounds – cash that could serve you better sitting in your bank.
- Audit all your subscriptions and check which ones you’re paying for that you don’t need or use
- Cancel those which are surplus to requirements or not essential to your team
Although this may seem like a small saving, you could well be surprised by just how fast the savings add up, especially if you’re paying for multiple subscriptions.
Switch suppliers
When was the last time you shopped around for a better deal on your office utilities? If you’ve stuck with the same supplier for years, you might be paying over the odds for gas, electricity, internet and telecoms. You’ll also be missing out on the welcome offers and special deals that other suppliers are offering new business clients.
Shop around for better tariffs and better deals and see what you could save by switching. While this won’t put cash in your bank it will reduce your outgoings, so you’ll have more funds to play with as you ride out this tricky period.
Renegotiate terms with your creditors
Falling behind on payments is a major source of anxiety. If your cash flow shortfall means you’re in danger of falling into arrears, pick up the phone and renegotiate terms with your credits. You’ll often find that most are open to setting up a payment plan when times are tough and will want to help you repay what you owe.
Seek investment
If you need a serious injection of cash, you might want to think about searching for some outside investment. That could take many forms, from a bank loan to bringing someone into partner with you.
If your cash flow issues have led to a poor credit rating, you might find that your bank isn’t keen to lend to you. Don’t despair if they say no as there plenty of other alternative investment sources to consider:
- You might be able to find an angel investor who’ll pump some cash into your business in return for a stake. Some investors will also play an active role in your day-to-day operations, which might be beneficial if you’re lacking expertise or want to tap into that person’s contacts.
- You could try crowdfunding, especially if you’re keen to launch a new product but just don’t have the funds to finance your idea.
- Asset finance could help you to finance the cost of essential new machinery, tools or vehicles, which could then help you to bring in more cash.
Talk to us
A quick and easy way to resolve your cash flow worries is to talk to us! We understand that you need money in a hurry and can have cash in your bank in as little as five working days. We also make life easier when it comes to the application process, as we won’t ask for a perfect credit score or a lengthy business plan.
If your bank has given you the cold shoulder, talk to us instead.
