Image via Flickr by Jennifer
Assets are nice, but liquid capital is a necessary thing whatever your business. Sometimes circumstances conspire to reduce your access to cash on hand while leaving your business intact, leaving you floundering for a way to keep the lights on. If expansion leaves your business short of money, try these helpful tips.
One of the quickest ways to deal with a liquidity shortfall is simply to acquire more money. Lenders are often happy to provide loans for small businesses. Although it is important to take on only as much debt as is required to keep your business thriving, it is equally important to not be afraid to get a line of credit when necessary. Keep in mind that debt is really just a part of operating a business.
Another way to free up resources is to cut down on outgoing cash. If you examine your books, you might be surprised at how much of a dent in the monthly profit margin your costs of operation cause. Carefully re-engineer your methods of operation; for instance, compare when your clientele actually use your facilities to your actual hours of operation and see if you can reduce payroll and facilities expenses by adjusting. This is just one way you can acquire liquid capital for both the short and long term.
Examine Banking Practices
Every business needs somewhere to store their money, but not every business takes the time to make sure that their financial process is optimal. Make sure that your accounts let you move money where it is needed so you’ll have more cash on hand. Also, scour your investment accounts, looking for low performers. If any of them haven’t moved the needle in months, it might be time to cut losses.
Streamline Your Billing
Is your business billing customers in a timely and efficient manner? If not, you have a problem. Make sure your bills are sent out on time and are clear enough to avoid any confusion. If you’ve already done so and yet have clients who do not remit within a reasonable timespan, it may be time to reevaluate your billing procedure from the ground up. This will help ensure you’re not being taken for a ride by unscrupulous clients.
Change Terms with Your Vendors
Many vendors offer a variety of payment terms and periods. If you are in a short time cash crunch, and are pretty sure you’ll be back in the black soon, consider taking longer-term payment options. Often this will increase your cash outflow over the long term while at the same time freeing up resources now. If you decide on this option, be sure not only that you will be capable of making the new payments over the whole term but that you switch back if and when it becomes wise to do.
Crises come and go for businesses both big and small. Weathering them takes fortitude and intelligence, but is entirely possible. Keep your eye on the prize and your brain agile, and you’ll soon find that this, too, shall pass.