When your business is having a lean month (or lean year for that matter), it is important to know what to do and when to do it to so that you can continue to trade. Many business owners who fail to change their behaviour and spending patterns in enough time will eventually find that they are in real danger of running out of cash.
This makes day-to-day business management even harder than it is now and, in the worst case scenarios, you may have to cease trading. In order to avoid this, you should have a plan of action for dealing with times when cash is at a premium, being clear in your mind on the steps you need to take when more has been going out than has been coming in for a prolonged period of time.
In this article, the Panthera team explain how to get more money into your business and how to cut your costs at the same time.
Collect overdue invoices vigorously
An overdue invoice is money that’s rightfully yours for goods and services provided and where you should be in receipt of cash which has not yet arrived. Many business owners find it difficult and stressful to remain vigilant about issuing invoices to clients and in the diligent monitoring and subsequent chase-up of accounts which have become overdue. There are ways to do it though which can take just a few minutes a day – check out one of our previous posts on 5 ways to get paid faster.
Following on from the previous point, one of the best ways to collect money due from unpaid invoice is to work with an invoice factoring service. These are specialist finance companies which will buy the debt contained in the invoice from you for roughly 90% of the value of the invoice upfront. When the customer does pay, you get the remainder of the money minus a small commission.
To keep your existing customers on board and to increase the speed at which your money is coming in, you should consider incentivising your customers to pay more promptly. You can do this by offering them a small discount if they pay their invoices within a week rather than in the standard 30 day timeframe.
Another way that you can renegotiate with your existing customers is to insist that they either pay a deposit upfront or by getting them to set up a direct debit with your business. This way, you can more easily predict how much money you will have in the bank in the coming months without having to factor in late payments and unpaid invoices.
Push back salary increases
If you have any salary increases planned, you should consider making your employees wait. This might not be the most popular move to make but it’s a lot more popular than reducing people’s hours because there is not enough cash in your business to be able to safely meet your increased fixed costs.
On a similar note, if you’re looking to move to new premises, employ more staff, or open up a new division of your business, you should put that on hold until you have sufficient money to do so. You can’t buy your way out of a cash shortfall, it is far more likely that you’ll simply multiply your problems.
A Panthera accountant can help you become more financially efficient in almost every aspect of your business. From taxes to cashflow stability, accountants are experienced in helping clients consolidate in rougher times and expand in better times.
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