Basic Money Shortage Solutions
If you are starting out undercapitalized, like most
small businesses do, and if you have big growth plans,
you are sooner or later going to run out of money. How
severe a cash shortfall you have will be dependent on
how early you realize that you have a problem, and on
how rapidly and aggressively you work to correct it. This
article focuses on the most effective steps that you can
take during a cash crunch.
The first area that can be adjusted during a cash crunch
is cash inflow. Look at all of the receivables owed to
you. Determine whether or not there is some means by which
you can receive payments earlier than anticipated.
Get on the phone. Use your most upbeat tone, and try
a little honesty, such as "We're a little tight on
cash right now, and I would greatly appreciate it if you
could pay us now." If necessary, offer small discounts
for faster payments or larger discounts for prepayments.
Decide how serious your situation is. Then decide which
bills you must pay. Remember, very few businesses of any
size pay their bills within the stated terms.
If you owe a particularly large amount of money to one
key supplier, be cautious. If you intend to pay some of
the bills significantly late, advise it of this in advance.
If you are fairly certain as to when you will be sending
payment, offer this information as a promise in exchange
for continued credit on new purchases.
Make sure that you decide who gets paid and when, not
your creditors. Pay those creditors that are most important
to the continuation of your normal business operations
Some creditors may threaten to take further action, to
turn your account over to a collection agency, or sue
you. Don't panic. If your account is turned over to a
collection agency, this will be the least of your worries.
If a creditor does take you to court, the hearing date
will be months ahead.
If you don't know when you will be able to pay
a bill, don't let a creditor push you into making
a payment promise. Instead, tell creditors that you have
placed them on your payment list. Assure them that you
haven't forgotten about them. Let them know they
will be paid as soon as possible, but you can't
say when exactly that will be.
Don't forget about noncrucial suppliers, but pay
these vendors only when you have the extra funds. Again,
as you did with crucial creditors, prioritize and pay
those suppliers whose continued services or goods are
most important to the maintenance of your business.
By Source Streetwise Small Business Start-Up