How to Stop Your Small Business from Running Out of Money
12 Apr, 2016 / Comments: Comments Off on How to Stop Your Small Business from Running Out of Money / By William Mahnic
Having your own business is simultaneously one of the most fulfilling and most difficult jobs possible. It’s an outstanding accomplishment to have control over your own employment. However, when you start seeing signs of your cash flow drying up, either through a slower sales cycle, unforeseen competitor, or uncontrollable expense, then you may not be feeling so lucky. That being said, it’s not the time to throw in the towel just yet. Here are some tips to stop your small business from running out of money.
When you start fearing a lack of cash flow, it’s easy to go into panic mode. Nevertheless, it’s important that you remain calm and collected. You need to determine if there is an underlying problem that can be fixed relatively easily before your business runs out of money. Think of it as an opportunity for your business to evolve into one that is more self-sustaining and attracts higher interest. If you did not come up with a problem that can be easily fixed, then it’s still imperative that you remain calm. Keep in mind that your employees are depending on you and panicking will only cause you to think irrationally.
Get Your Bills Situated
When running out of money, the first thing on your mind is likely the bills that will start piling up. It’s critical that you prioritize these bills by looking at various factors that will aid you in determining which to pay first. It’s recommended that you pay off those vendors that can put you out of business first. For example, if your company sells dresses then make sure to pay the material vendors first. Moreover, if you can, see if you can elongate terms with your vendors. However, ensure that you don’t do so to the point that they refuse to deliver anymore. You should also consider negotiating new payment terms with your creditors. Some will even accept several interest-only payments. The important thing is that you do not hide from your lenders and creditors, but are upfront about your money issues.
Consider Borrowing Money
You have the option of taking out a loan, which is a temporary solution that is ideal for those business owners that have money coming in, but are in an interim cash crunch. That being said, if you don’t have any foreseeable money in the future, meaning that you don’t have any customers that owe you money, a loan may add more to your troubles in the long run. Keep in mind that if you approach a bank, you’ll have to show them your financials and so be prepared to talk to a lender about why you are having issues with your cash flow.
Analyze Your Operations
Analyze your operations and see where if possible you can cut expenses. Perhaps you don’t need that fancy accounting software after all, and you can always read trade magazines online so if you have any subscriptions, now is the time to cancel them. Besides your business expenses, look at any personal expenses that you can cut such as going to restaurants and buying new clothes. Even though your business and personal credit cards and accounts are separate, tightening your belt at home can aid you in the case that you have to use some of your savings on your business.
Get Advice on Your Money Troubles
You don’t have to go at it alone. There are plenty of resources that will give you free advice on how to handle your small business. For instance, check out score.org or a local Business Development Center at sba.gov/sbdc. You may also want to invest in an advisor who would be able to help you develop a plan to get your hands on cash and keep your business open. However, they may tell you your business needs a total revamp, which you must be prepared for.