Even the most successful businesses hit periods where they struggle a bit. Many factors can contribute, from business slowing down to simply not taking the time to evaluate the current situation to see where changes and smarter decisions can be made. Here are just a few tips to help you out.
Assess the Situation
This tip sounds obvious, but is often overlooked. You know there are some issues financially, but you haven’t taken the time to really examine the situation. So long as you avoid this step, it keeps the problem from becoming ‘real.’ It can be uncomfortable to do this—all your money woes staring you right in the face
Think Carefully Before Taking on Any New Debt
Running a business costs money—you need to pay for equipment, marketing, and a million other things. Even if times are tough financially, you may not be able to put a complete moratorium on spending. But, it is important you carefully consider each time you are thinking of making a purchase that will increase your debt. If you don’t think you will recoup the money in a reasonable amount of time—what qualifies as reasonable is something you know for yourself based on the item—hold off for now.
How is Your Debt Structured?
Take a look at all of your debt to see if you can structure it differently to increase your cash flow now. Taking on more long-term debt to pay off any short-term debt may be something to consider to get more money in the door on a month-to-month basis. Just be cautious about borrowing against real estate for these purposes.
Make a Budget
Like taking stock of your finances, making a budget is another unpleasant activity that can make us feel down—again, it makes our money troubles real. We can no longer deny them. It is crucial you tally up income and expenses and make a budget. Vague calculations in your head wont’ cut it. A budget creates order, and keeps you on track. And, don’t just budget your business; work on your personal budget as well to keep as much cash for you as possible.
Examine Options for Financing
Talk to your local SBA office about government-backed loans. If you plan on applying for a loan, you must prepare your application carefully to maximize the chances of approval. Consider factoring invoices to get money in the door more quickly. If you are having trouble coming up with capital to meet customer orders, financing purchase orders is an option so you don’t have to turn down business for lack of funding.
What is Happening with Your Receivables?
Poor management of receivables is a big problem for lots of businesses, which is surprising given the importance of properly managing customer payments. Send out invoices as soon as work is completed, rather than batching this task once a week or whatever schedule you are on now. How much money do you have outstanding that is past due? What are you doing to collect it? Do you have a set procedure in place to deal with past due invoices, or are your efforts at dealing with late payments haphazard, random and unorganized? This part of your financial house must be in order, no two ways ab.