Is your business strapped for cash?
Look, we’ve all been there at one point or another. Businesses go through seasons where money is tighter than usual for a variety of reasons. It might be due to a “down” month, poor cash flow, or a large unforeseen expense. Whatever the case may be, it’s important to determine the reason for your cash shortage and plug that hole as soon as possible.
But in the meantime, your bills aren’t going anywhere. You’ve still got rent, payroll, vendors, and other expenses to pay. So, let’s take care of them!
10 Quick Solutions for Your Cash Problem
Ready to solve that cash problem of yours? Here are 10 ways to inject cash into your business!
1. Lower Your Own Compensation
Lowering or eliminating your paycheck until your cash situation improves is one of the most pain-free ways to alleviate your business’s financial burden. Remember, this is only a temporary adjustment. You can recompensate yourself once your business has found its footing again!
2. Crack Down on Your Accounts Receivable
If you’ve made a habit of letting old accounts fester, it’s time to follow up with customers on their overdue balances. To incentivize faster payment, you could offer a credit card option, check option, or discount. Next, tackle your accounts that aren’t past due. Be honest about your cash situation and extend the same payment options.
3. Ask for Prepayments and Down Payments
While this won’t work in certain industries, asking customers for prepayments or down payments for your products or services is a great way to accelerate a percentage of your cash flow. Again, you may need to offer a discount or additional service as an incentive for them to pay.
4. If You’re Desperate, Sell Your Invoices
If you really need cash and you’re not having much luck with your accounts receivable, call a factoring company. In most cases they will deliver payment within 24 hours in exchange for a percentage of your invoices once they are paid. Be careful, however, as once you start selling your invoices, it’s very difficult to stop.
5. Hire a Collection Agency
If you have old invoices that you’ve already written off, hire a collection agency to track them down. While the collection agency will likely charge a significant percentage of the invoice for their services, any payment on an invoice you’re unlikely to recover is a positive result.
6. Lend Your Credit or Assets to the Business
If you have access to any assets that could be used to plug your company’s temporary cash flow problem, consider loaning them to your business. Remember to always document your transactions, keep your accounts separate, and make sure your family is on board.
7. Ask Close Family Members for Help
If you don’t have personal assets to help plug your cash flow problem, consider asking a family member for assistance. Keep a clear paper trail and make every effort to pay your them back as soon as possible. You don’t want to take advantage of their good will!
8. Ask Your Vendors for Extended Terms
Whether you owe your vendors money or anticipate owing them down the line as a result of your cash shortage, request extended payment terms. If your terms are net 30, ask your vendor if they will allow net 60. If your terms are net 60, ask your vendor if they will allow net 90. An extra 30 days can make a world of difference.
9. Use Your Credit Card or Line of Credit
While you might not love the idea of turning to credit to help pay your overhead, this is a common strategy for small businesses. Charging your card will buy you a full billing cycle to get your cash flow back in check. Just be sure to pay your balance on time, as this is an expensive solution.
10. Bring in an Equity Partner
If you’re open to sharing stake in your business, bring on a partner or investor who can help stabilize your cash flow. This is something you will want to approach your attorney about, as the long-term consequences of this decision could end up making or breaking your business.