Cash Flow Hacks (Part 1 of 3)
We know what it feels like when cash stops flowing. Your mind is on your business while you stare at your kid’s basketball game. You dread seeing the mail come with another stack of payables; all demanding payment with late fees attached. You think about it around the clock and yet, in spite of brief glimpses of hope, nothing ever really gets solved.
We’ve been through it, and we get it. Read below to see our first 3 strategies that may be the beginning of your comeback story.
- Rework existing financing: Spend some time on your financials either alone or with help. Bring in a new expert, someone with fresh eyes, and not the same people who have helped you into the mess you’re in. Review and reshape your P&L and Balance Sheet. Consider consolidating your debt into one package at a lower rate and don’t be afraid to ask for creative lending solutions.
Our experience: We created extra cash flow for a larger but still small business, by repackaging existing loans at more favorable rates and terms and an extra $500,000 line of credit for working capital. They had previously been turned down by many banks until we properly prepared their balance sheet. In addition to the line of credit, their monthly payment was lowered by 35% from what it had been without the line. This created a huge injection of cash for them.
- Convert excess inventory by aligning purchases with production needs: Inventory means tight resources: from shelf space to employee time, all leading to one big shortage: cash. It will be worth your time to evaluate your supply chain processes which may allow you to sell off excess or stale inventory, convert to “just-in-time” inventory management and streamline ordering procedures. For shipping, take advantage of “Lean Logistics” brokers who let you share shipping costs with a variety of other businesses.
- Eliminate prepayments and deposits: Review which suppliers and vendors may be tying up your cash when requiring deposits. For instance, your insurance company may either require or offer you an option or discount to pay a year at a time. Since cash is tight, commit to only a month at a time allowing you to be more flexible and preserve your cash assets. If the vendor is holding your cash for a year, it’s no crime after a few months to ask them to return your cash and convert you to month-to-month.
IDF invites you to give us a call and let us evaluate your cash situation. We can help you create a plan that will get your cash flowing again and provide real hope before your around-the-clock thinking takes you for another sleepless night.
