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7 Ways To Protect Your Cash Flow
The biggest reason for Business Failure is the lack of cash or liquidity, and as we approach the Post-Lockdown period, and a likely recession, it is paramount that you protect your cash position.
Having traded through two recessions, myself, I set out some good and invaluable advice based on my experiences, here in this mini blog.
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7 WAYS TO PROTECT YOUR CASH FLOW
THINK 'CASH IS KING'
With likely difficult trading times ahead, for many good and profitable businesses, it is going to be difficult to keep trading as we all face a world of rising unemployment, less spending power for consumers and a drop in business sales.
One of the best ways to navigate these choppy waters, going forward, is to protect your cash flow. While you have cash in your bank account and good credit resources, you will at least be able to pay your way and, hopefully weather the storm.
There are a number of ways that you can do this:
You should take advantage of the Government's schemes for grants, no interest and low interest Government-backed loans etc. to bolster your cash reserves. Then, once you have these, look to protect these.
Talk to your bank and ask them to extend your credit limits for overdraft facilities. The idea is not to spend this credit but to give yourself a greater cushion, so that you can keep paying your suppliers when things get really tight.
Talk to your suppliers and creditors and ask to delay payments. Just a couple of weeks can make a lot of difference to protecting your cash flow. Rent could be one of your biggest costs and a 'rent holiday' would be useful for you. Bear in mind, though, that your creditors will be squeezed on cash-flow, too, during this period.
Review all your expenditure, costs and outgoings to see where you can make savings. You should really look to cut, cut, cut and cut some more! You should look at any non-necessary expenditure or any costs that are not delivering a return for you. Employment costs are likely to be one of your highest and you should review these with a view to reducing them. Remember, however, to always consult with employees first before cutting hours and wages, as you will get less support from disgruntled employees at a time when you want maximum help. If you are paying for advertising and marketing, review the return value on these, too; maybe cut out paid marketing and replace it with free social media marketing instead?
Liquidate dead assets. Look to see if you have any redundant equipment or business assets that you no longer use and see if you can sell them. Assets that are not creating sales or gross profit for your business are a liability and you should look to convert these into cash, even if you don't get the full value by selling on Ebay.
Plan your cash and project your cash flow, going forward. This is really important and should be done for at least three months ahead, if you are to control and protect your cash position; don't let cash problems be a shock and be unexpected. By planning and projecting
Look at your own personal expenditure and see how you can cut back here, too. Even small cut backs add up over a period. If you have a mortgage for your home, talk to your lender and ask for a payment holiday, but be sure to explain your situation. If you have credit cards, maybe ask for a greater credit limit and look to only pay back the minimum amounts to help your personal finances.
TALK TO EVERYONE
It is important that you open up channels of communication with all parties when doing this; don't just not pay some of your bills without talking to your creditors first. And, don't say the cheque is "in the post" when it is not; it always pays to be honest.
If you want them to help you, you must engage with them and come to good arrangements. Then, when you agree terms of payment etc., it is equally important that you keep to your agreements and keep a dialogue going to keep them abreast of what is happening.
MINIMISE THE STRESS
Having cashflow problems is one of the most stressful things any business owner can go through. By following my advice and by taking action now, you probably won't eliminate the stress, but it should reduce the levels considerably if you can do this right.
Remember, your health is important through this period, too.
THINGS WILL GET TOUGH
Your cash situation might be reasonable at the moment but don't get complacent. Do as I suggest now and protect your cash position and try to maintain it through this period; I fully expect the next couple of years to be tough and you must prepare now for this.
You must think that even profitable business can fail if they run out of cash!
Having come through two deep recessions, it was maintaining a good cash flow that got me though and I would recommend the same process.
This mini blog is part of a series of special short blogs to help business owners navigate Post-Lockdown, please take a look - there is much good stuff included based on 40 years of running businesses.
Best of luck!
LET'S BOUNCE BACK MUCH STRONGER!!!
ANY QUESTIONS OR COMMENTS
If you have any questions or comments, please contact me below.
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