A lot of small businesses struggle with juggling between their receivables and payables. It is a constant challenge to get clients’ invoices paid sooner, while paying suppliers and other expenses at the last possible moment.

When your accounts are running on time, you can maximize your use of cash to grow your business. However, even the most carefully managed finances can hit a speedbump. If you run into a cash flow crisis and are struggling to pay your business’ bills, these some of the best top 7 practices that will assist in ensuring that your business remains intact.

 1.      Utilize Your Financial Statements

Whether you have internal accounting professionals or you use outsourced bookkeeping services, insist on regularly updated financial statements. The statement of cash flows and the income statement are most important for keeping an eye on how money is moving through your organization.

Although it is impossible to prevent every cash flow crisis, the more carefully you watch your statements, the more warning you will have to a possible issue. Greater lead time gives you a wider variety of options to manage the situation.

2.      Adjust Your Business Plan to Improve Profit Margins

Having to face a cash flow shortage should automatically lead you to closely inspect your business plan, processes, operations and expenses. You are required to determine why you encountered a cash flow shortage, whether it will be a recurring problem and you will also need to put a plan in place to handle future shortages.

To implement this, you use job costing to look at your business’s profit and loss statements and profit margins based on individual categories within your company (jobs, clients, employees, events, marketing strategies, products and services) to determine which areas of your business are the most and least profitable. This will help you adjust your business plan to focus on services that generate the most profit. It is also advisable to optimize your pricing structure and also identify areas of waste or unnecessary expense to remove from your operations.

 3.      Explore Your Financing Options.

Facing a short fall in any type of business is generally challenging and most businesses rarely survive.  The best way of dealing with cash flow issues in your business is by using your accounts receivable and other assets as collateral. By doing this, you get to mix and match from a variety of flexible financing options, including invoice factoring, asset-based lending, inventory lending, and equipment financing from your business.

 4.      Cut Off on Spending

During difficult cash flow times, it is beneficial for you to examine your expenses to get to the root of why you’re currently in this situation.  Look at all areas including; office supplies, media subscriptions, air conditioning or organization memberships. The more you cut off, the more money you can put back into your cash flow.

5.      Sell Assets

In addition to decrease spending on non-essential spending, if you may have duplicate equipment or you overspent on assets you aren’t using at full capacity, the best time to sell would be now.  Although this is a temporary measure, as you can only sell an unnecessary item once, it is an effective and quick way to raise some cash when you are forced to.

In this instance, you can consider leasing cars and property for the business instead of buying or selling duplicate equipment. The best way to work this out is that you carefully look at what you don’t necessarily need at the time.

6.      Speed Up Customer Payments

This strategy will work out for you if you have made good customer relationships a priority throughout your time in business, you may have a ready source of cash during lean periods. You can motivate your customers by offering discounts for early settlements, or shorten your payment dates but also keeping in mind to invoice as early as you can to give your customers enough allowance.

This is also a good time to look at outstanding invoices. If any significant receivables are overdue, increase your collections activity. Consider accepting credit card payments, if you don’t already so that you can charge the card immediately once the customer agrees.

7.      Monitor Your Cash Flow

The most important measure for ensuring that you don’t find yourself in the same position multiple times is that you monitor your cash flow as frequently as you can. You can make use of a variety of systems to do this, or consult a professional.

When you regularly monitor your cash flow, you’re able to track the flow of funds that go in and out of your business, making it easier for you to identify potential risks, and be able to tackle them ahead of time.

The most important thing to remember about this is that ignoring the problem is the worst of all possible options. The sooner you get a handle on the full extent of the problem and begin brainstorming possible solutions, the more likely you are to survive the crisis with your business intact.

 “Making more money will not solve your problems if cash flow management is your problem”- Robert Kiyosaki