How to Get Through a Period of Negative Cash Flow
Cash flow in the red? It happens to all of us. Here are some tips to get you through the lean times:
No matter what you do, and how careful you plan, chances are that there will be times where you end up spending more than you earn in your business. In other words, you're going through a period of negative cash flow. What's important is how you deal with it!
Build Your Safety Net
An ounce of prevention is worth a pound of the cure. The same holds true for cash flow problems. You won't have to worry about generating more income if you have a bit of a financial buffer in the bank account. Think about your operating expenses and then come up with a figure that would help you make it through a "Cash Flow Drought". Set aside 2 to 5 percent of your monthly profits to build up that safety cushion.
Quick Solutions
You don't want to burn through the savings you've set aside too quickly. As soon as you start to notice that your expenses are higher than your income for the month, take a look and see if there's anywhere you can cut back. Don't make any purchases that aren't absolutely necessary. If you know this is only a short term problem, talk to your suppliers to see if you can push back payments for a few weeks.
Next take a close look at your accounts receivable. Look for any customers that have been billed but have not yet paid. Give them a call or send them a quick email reminding them that the payment is due.
Email Marketing
Since we're talking about emails, this is also a great time to email your existing customer base to remind them about your products. Often just a simple email will drum up some extra business in a time of need. If you don't think this will generate the cash you need to make it through this financial bottleneck, consider running a sale of making them an offer that will be hard to refuse. Throw in a free consultation, come up with a bonus, or offer a 15% discount to anyone placing an order in the next 48 hours. You know your customers and know what will make them get out their wallet and buy. We did a whole post on 5 Stategies for Increasing Cash Flow you can check out for even more tips.
Analyze and Rebuild
Once you make it through the period of negative cash flow, go back and figure out what caused it in the first place. What can you do in the future to avoid a similar situation? Last but not least, don't forget to rebuild your financial safety cushion once things are back to normal.
No matter what you do, and how careful you plan, chances are that there will be times where you end up spending more than you earn in your business. In other words, you're going through a period of negative cash flow. What's important is how you deal with it!
Build Your Safety Net
An ounce of prevention is worth a pound of the cure. The same holds true for cash flow problems. You won't have to worry about generating more income if you have a bit of a financial buffer in the bank account. Think about your operating expenses and then come up with a figure that would help you make it through a "Cash Flow Drought". Set aside 2 to 5 percent of your monthly profits to build up that safety cushion.
Quick Solutions
You don't want to burn through the savings you've set aside too quickly. As soon as you start to notice that your expenses are higher than your income for the month, take a look and see if there's anywhere you can cut back. Don't make any purchases that aren't absolutely necessary. If you know this is only a short term problem, talk to your suppliers to see if you can push back payments for a few weeks.
Next take a close look at your accounts receivable. Look for any customers that have been billed but have not yet paid. Give them a call or send them a quick email reminding them that the payment is due.
Email Marketing
Since we're talking about emails, this is also a great time to email your existing customer base to remind them about your products. Often just a simple email will drum up some extra business in a time of need. If you don't think this will generate the cash you need to make it through this financial bottleneck, consider running a sale of making them an offer that will be hard to refuse. Throw in a free consultation, come up with a bonus, or offer a 15% discount to anyone placing an order in the next 48 hours. You know your customers and know what will make them get out their wallet and buy. We did a whole post on 5 Stategies for Increasing Cash Flow you can check out for even more tips.
Analyze and Rebuild
Once you make it through the period of negative cash flow, go back and figure out what caused it in the first place. What can you do in the future to avoid a similar situation? Last but not least, don't forget to rebuild your financial safety cushion once things are back to normal.
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