01. Cut back on your working capital. When times are tough, the most logical thing to do is to embark on cost-cutting here and there. You can cut your working capital if you freeze increases in your inventory. That is because inventory usually ties up cash which you need freed up for use elsewhere in your business. In addition to reducing your inventory, you can also be more diligent in collecting your debts. That helps to improve your cash-inflow.
02. Suspend spending on capital items.
In many businesses, spending on capital items is always a long-term investment.
When the times are tough, it is simply prudent to suspend spending on capital
items altogether. That frees up your much-needed cash for other vital areas of
the business. When your business is struggling to pay salaries and meet other
essential overheads, embarking on capital spending is not a very smart thing to
do.
03. Closely watch your expenses.
In very difficult times, it makes economic sense to cut operating expenses.
Keeping a close watch on these expenses enables you to know what to cut and
what to keep. Whatever you cut, but sure they do not completely cripple your
business. Keeping your business alive through reduced operations is clearly
better than allowing it to go under if you fail to act prudently.
04. Keep a tight control on your
inventory. Be sure you have very good and up-to-date records
of your inventory. That is one vital way to avoid undue leakages through losses
and thefts which your business can least afford. Use due diligence at verifying
all claims from your creditors and pay only for items your business actually
needs on the short run.
05. Renegotiate your main concessions.
When times are tough for your business, you can ask for new business
concessions or you renegotiate better terms on your existing concessions. For
example, you can ask for waivers on interest charges, fees, rates which your
business has already been assessed on or you ask for extended terms to pay.
These actions can give you temporary respite when you have cash-flow problems.
Going bankrupt is neither in your interest nor in the interest of your
creditors. That is why your creditors need real flexibility to help keep you in
business through tough times.
06. Explore every way to grow your
sales. One of the most sensible reactions to a cash-flow
squeeze is to grow sales. That is because getting more cash-inflows into the
business is what makes real sense in tough times. To sell more, it is good to
explore ways to produce on order if the customer is paying cash in advance.
What your business needs in tough times is real cash and if your sales bring in
cash when you supply or before you supply, that is better on the short run for
the business.
07. Explore viable ways to refinance the
business. In tough times, be ready to negotiate any and
everything which can help your business to ride out the storm. For instance, if
you can negotiate and restructure your debts, it is capable of lowering what
you pay out regularly to service the debts. Refinancing usually frees up some
cash for you to use elsewhere in the business.
From the foregoing, it is clear that when your
business faces tough times, it is best to focus all your managerial decisions
on limiting cash-outflow from your business and increasing cash-inflows. That
is how best you can quickly ride out the tough times. These 7 tips come in very
handy in that quest.
