Part 2 in our “cash flow through uncertainty” series. Missed part one? Read “How to manage cash flow through uncertainty.”
When you’re in the thick of a full-blown crisis and know what you’re up against, what can you do to come out the other side intact? What strategies can you use and what resources can you lean on?
Here are five places you can focus your attention:
1. Focus on your customers
Your best customers are a great resource in times of crisis. You could offer them hard-to-shift inventory at a discount and give favourable terms for paying invoices early. Now is also a good time to contact old customers: use your CRM software or run a report from your sales software and send them offers that can turn inventory into quick cash.
2. Be proactive with your receivables process
Make sure your invoices are extremely clear, with a specific due date, purchase order number, details of the goods or services the bill is for and the name of the person who placed the order. Send out a reminder when the due date is close and another when it passes. Pick up the phone and call if you still don’t receive payment. Make it easy for customers to pay: offer e-transfer, credit and debit card and mobile payment options.
3. Consider invoice factoring
This financing option allows you to sell your invoices to an invoice factoring company such as Liquid Capital for a small fee. You receive money owed much faster, and, because it’s not a loan, there is no interest to pay. This can be a really effective cash flow strategy for businesses during a crisis.
4. Try and extend your payables
Talk to your key suppliers and try and improve your payment terms. Negotiate longer payment periods or ask for a discount if you pay sooner.
5. Review your cash flow forecasts constantly
During a crisis, you need to keep on top of your cash. Look over your cash balances daily and reconcile them with a robust accounting software so you constantly know how much cash you’re holding at any given time. Review your forecasts more often than in normal times: at least every three months.