One of the common pain points for any business owner is to maintain a seamless cash flow. For any business, making money and keeping the cash flowing is considered a tangible aspect. In such situations, finding ways to navigate through tough times can help put back the business on track in no time. Here are 7 tips for pulling your business out of a cash crunch.
1. Analyse Clients Properly
The prime mission of any business is to make money. But, getting an order or striking a deal is only considered fruitful when you get the payment within a stipulated time frame. A sound strategy is to start working on small projects, and once the trust is established, think of taking more significant projects with the client.Starting with small projects will give an idea of how quickly the client makes the payment. For instance, if a client takes about 90-120 days to clear a small invoice, then imagine the payment tenure of a big project.
2. Diversify Your Client Base
For any business having just one client or client type may turn out to be a vulnerable factor leading to a cash crunch if anything goes down south. In case the client hits a slump and postpone the payment, your business will inevitably face a cash crunch. Hence, having a few more clients in your kitty will provide some sense of security.
3. Negotiate Contracts Carefully
Another way to reduce the chances of cash crunch is by asking for a substantial deposit on projects upfront. Rather than taking the entire amount post the deliverable, think of getting paid as the project progresses. This will considerably aid in reducing business cash crunch. If your business operates in the field where getting payment takes at least 30 days - as is the case with big corporates, then think of offering a discount to the client if they make an early payment.
4. Complete Projects On Time
Getting into circumstances where you have several ongoing projects that are in the midst of the winding-up process and will take time to deliver may lead to a money crunch. Having a meticulous plan right from taking up new orders to delivering it on time is considered prudent to the success of any business. Always remember, the quicker you finish a project, the sooner you can send an invoice.
5. Stay On Top Of Invoices
A crucial thing about invoice is that when you offer a 30-day payment term to a client, the 30-day period starts when you dispatch the invoice. Hence, being vigilant about invoice disbursal is considered essential for timely payment, and thereby aid in avoiding a cash crunch.
6. Try Invoice Discounting
A convenient way to avoid cash crunch is by encashing unpaid invoices through the power of invoice discounting. Invoice discounting refers to the procedure of using unpaid invoices to gain working capital. KredX's invoice discounting service allows businesses to access collateral-free, off-balance-sheet working capital by using their unpaid invoices within 24-72 hours.
7. Set Up A Security Net
Having a security net for your business like a credit card or line of credit with your bank will help avoid a cash crunch. You don't need to utilise them, yet it's great to have them set up for a crisis.
Every business, at some point, will face cash crunch issues. However, it is critical to have a sound recovery strategy in place to avoid such circumstances. Having said that doing timely cash flow analysis of the money inflows and outflows will provide a better overview of your finances. Conducting cash flow analysis on a weekly or monthly basis can make it simpler to identify cash movement.
Tips To Boost Your Accounts Receivables And Get You Customers To Pay In Time