Business can be an unpredictable, having unexpected changes in cash flow, market competition, and consumer preferences. Every business owner must always be prepared to deal with any changes that may occur, for better or worse, in the situation and outlook of the market and the enterprise itself. In order to stay afloat, a manager must be able to find a way to sail through rough financial periods that may threaten the continuity of business.
Rough financial periods can be as a result of industry setbacks, where a business niche faces a set of unique challenges that lead to reduced demand even when the economy in general is experiencing a boom. It can also be as a result of economic recession, illness, or injury. Whatever the case may be, there are a few ideas you can employ to help you keep your business afloat until your financial state becomes buoyant again.
Avoid making personal expenses from your business account
For any business to survive, it must be run as a separate entity from the owner. Dipping into your business to cover personal expenses is a sure way to destroy it. It also has severe tax implications. Rather than taking from your business you should consider other options available to you. Make arrangements before hand to avoid the chances of being tempted.
Consider renegotiating your debt with lenders to see how you can make smaller repayments over a longer period of time. This will enable you to have more available cash that you can put to use. Also, during such low cash periods, obtaining bridging loans can help you to stay afloat till your cash flow is back to normal. Although the options above generally increase the cost of debt in the long term, it helps to provide relief in the short term and keep your business running.
Control your budget
There are a couple of areas in your business where you can cut back unnecessary expenses. Also, you can find more affordable alternatives that will cost you less until you get back on your feet. When it concerns marketing, cutting back on costs can be tricky. You do not want to negate your marketing strategy since it will cause more harm than good. You therefore need to weigh your options very carefully as regards handling your marketing budget. It is advisable to maintain your marketing budget while finding other areas where you can cut back costs on. However, if you must, consider employing the 80-20 principle (the Pareto principle) to help you determine the marketing efforts that are the most productive and focus on those.
Delay capital expenditures
When facing a shortage in cash flow, it will be wise to delay capital spending, except when the payback is very short. Although it is necessary to invest in your business in the long run to keep it growing, making capital expenditures when your business is finding it difficult to make payroll will be unwise.
Reduce Working Capital
You can have an understanding with your inventory supplier and stretch your payables, reduce inventory without hurting customer service, and put excess inventory on a sale. Financing your business on credit cards may also turn out to be less expensive.