Every small business needs to be careful that they have substantial amount of cash to mitigate any untoward incidents like cancellation of orders, order loss during transit, payments being help up in legal processes etc. For small businesses funds at right time is essential for growth.
Now often it happens that despite hard work, quick processes and great products, you are not able to take the business forward. Why is it so?
It is only because you are facing a fund crunch to venture out on all opportunities and strengths you have.
There are some sure shot ways a small business owner can save himself from a Cash Crunch
- Use the marketing tools and models more frequently
Use the marketing tools and models like McKinsey’s 7S framework, SWOT Analysis, Pestel Analysis frequently to assess the situation. Contrary to the popular belief that only big businesses need this strategy tools, small businesses require it even more. This model will help you identify the leverages of the company and how to make it more conducive to operate in a specific marketing environment.
- Don’t overcrowd your inventory
Some small businesses tend to overcrowd their inventory in expectation of orders. Even if one has correctly assessed the market demand, overcrowding the inventory means more cash being tied up in assets and less amount left for marketing, sales and other processes. Unless all the elements work together, sales and a good brand reputation doesn’t occur. So if your other elements are lacking, you may be left with unsold inventory even when the market demand is considerable.
- Provide discounts to customers on paying up before a certain date.
If lot of payments are pending from customer’s side, the best option is to provide a good discount for paying up early. That way, cash would be available through the business cycle for investment in your company. Moreover, customers would be more than happy to choose your company because of discount. So you have a win-win situation where you are creating more value for your company pricing structure, faster recovery of debts, and ample cash to create new products and earn profits on them to the extent of discount you have provided. It is just like a see-saw scale where you need to judge the profit on the parameters of time, resources and cash available for further investment.
- Expenses in proportion to revenue
If a small business makes more expenses on R&D or launching some new product or trying some new distribution or marketing means, they should ensure that the revenue generated at the end is in sync with the expenditure. However innovative and good be your product, it would take some time to zoom up in the market. Till that time you need to ensure that you are earning enough revenue to continue expenditure at higher levels. Otherwise you may be seated with a great product , a great marketing strategy but no fund to carry it forward.
- Manage your profits wisely
If you are running profit in one season, it doesn’t mean that you invest all the profit in products and processes to earn more profit. You need to have considerable savings which can cushion you in hard times or if market conditions change drastically. After all, risking all your booty in a single bet is not a viable option.
- Sell non-viable assets
Run an audit of the company resources and assets. You would identify some assets that are simply not being used but taking up storage space or have holding costs. Sell them to have funds for other viable assets and projects. That way you would be streamlining company inventory and process even.
- Regularly send collection invoices
Your payments may be held up with vendors and customers. You may be embarrassed to send them invoice this month, since you have sent it the last month. Moreover, how your customer may feel, may be haunting you. I suggest to send invoices regularly. It shows to the customer how important the payment is. Not only that, out of tens of bills customers pay, they may forget an invoice and must be reminded regularly.
Moreover, if sending invoices regularly is your company’s standard procedure, no one would feel bad. I would personally recommend sending your invoice with a Quickbooks link so as to check whether your mails are being opened. Make sure that you don’t engage in aggressive collections. Intimating just through mails or with a polite phone call is enough.
- Insurance is must
For a small business, it is mandatory that insurance is done on assets, processes, and others. A small business has limited funds and mitigating the unforeseen loss is tough, unless you ensure. The government also allocates funds for various small business schemes. Try to use those funds and grants.
- Use a third party for debt collection and recovery
Use a credible and considerate third party for debt collection and recovery. These people have experience in recovering debts and can help you out in the long run. Just ensure that their working is not in contrary to your company’s ethics.
- Plan ahead to be immune from future mishaps
Just like it’s wise to reach out to a reliable CPM homework help to save your grades when you’ve been too careless, it’s imperative that you be ready with a backup or a new plan once you’ve overcome a cash flow crunch.
A sure shot plan will help save your business from a mishap, just like a knowledgeable homework helper would help save your grades when you are in dire need of it. All you have to do is, perform a regular cash flow analysis to identify the ebbs and flows in your cash flow and zero down on the best possible solutions.
By following these tips, one would surely be able to get over the debt and the payment recovery trap. Not only that, these biblical guidelines will ensure that you have a steady cash flow the entire financial year to keep your projects running.
John Cooper is a digital marketing strategist associated with the assignment help brand tophomeworkhelper.com. Cooper has years of experience working as a CPM homework help expert. He also acts as a guest lecturer in several B-schools. Besides being an active blogger, he loves to travel around the world.