When you dig further into businesses that struggle during hard times, you will likely find that their problems stem from cash flow issues. It can be hard to maintain a healthy cash flow, especially when clients and customers do not pay on time.
Smaller businesses that do not have large cash reserves are the ones usually hit hardest during hard times. That said, even medium-sized and larger businesses can find themselves struggling because they may have many more cash obligations than smaller businesses. So, how do you ensure your business manages its cash flow issues and stays afloat during hard times, in order to avoid redundancies?
Create a payment structure
When cash reserves are low, businesses are forced to take an active approach to manage the little cash they have on hand. Under this approach, businesses should create payment structures that ensure everyone gets paid and if they are not paid when they expect to, they know when and how they will be.
When creating this payment structure, every business should start by putting payment dates and deadlines in writing. This encourages accountability and gives these businesses a clear vision of where they should focus. Next, businesses should discuss late payment fees with businesses they expect payments from. These fees should be clearly outlined on any contracts these businesses sign.
Discounts can encourage your clients and customers to pay on time, especially if the discounts are time-bound, and are another option to explore.
Find areas where you can save money
A business that needs to pay its employees and does not have the cash to do so should find areas where they can save money. They should ideally do this without laying off employees. Energy savings, saving on stationary, and halting any new investments are some areas businesses can look at to save money.
Cut back on insurance premiums
Businesses have huge insurance obligations. These can range from employee insurance to motor trade insurance if you run a dealership. If you do, your motor trade insurance premiums might be quite high and put a strain on your cash flow. A good way to save money in this area is to compare different motor trade insurance options to find one that aligns with your budget and how much you want to save.
Consider taking out a business loan
A business loan is not the most attractive option for a lot of businesses, but if your business desperately needs cash, it can be a good option to get one. If the rough patch is projected to be short-lived, these small business loans can be very handy. Just ensure that you do proper research to find business loans that have attractive terms and conditions. Also, check the interest rate to ensure your business can handle the payments.
When your business is going through hard times, finding ways to improve your cash flow can be the best way to keep the business afloat.
Author Bio: Grace Murphy, experienced reviewer and journalist.
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