Cash flow isn't always consistent. No matter how hard you work to meet your financial goals, odds are that at some point, you'll fall short. When this happens, it's important not to panic—there are ways to recover and to avoid the problem going forward.
To find out more, we asked the experts of Forbes Los Angeles Business Council to share some tips for addressing cash flow issues. Here is what they advise you consider:
Members discuss a few things small businesses can do when cash flow gets tighter than expected.
Photos courtesy of the individual members 1. Start With The Costs Of Your Top Business Priorities
First, I'd identify my top business priorities and the cost associated with those priorities. Next, I'd look at variable costs to see if the business is incurring any unnecessary costs that can be cut. From there, I'd look at my fixed costs to see if there is any additional spend to eliminate. Are there other alternatives available that can serve as a resource, but at a lower cost? - Susan Levine, Career Group Companies
2. Cut Expenses By More Than You Think You Should
Run out of cash, and you might as well drain the blood out of your body. When short on cash, cut expenses deep. In fact, cut 50% deeper than you think you should. It hurts bad, but it feels much better even two weeks later. This buys you time to find revenue. - Benny Traub, Student Marketing Agency
3. Analyze Your Day Cycles
I would recommend that all business owners analyze their day cycles to understand how they convert working capital to cash. In addition, try to analyze your inventory valuation techniques. You carry manpower costs in your inventory that you may not know of—particularly in manufacturing. Industrial business can carry up to 50% of the value of their inventory in overhead. - Christopher Altschul, NS Corporation
4. Charge What You're Worth
Often times when starting out, a small business is afraid to charge a high fee out of fear of losing the business, or feeling like they don't "deserve" it because they're not big enough. I had a client tell me once they never negotiate down someone's proposed rate because they feel it said they don't value you as much as you value yourself. Game changer. Know your worth and charge accordingly. - Kelly Howard, EightSixtySouth
5. Prioritize Customer Satisfaction
Are you spending money wisely? Too often, small businesses spend money on the "obvious" things, but they don't look for ways to improve customer satisfaction. My first business struggled. People were stuck in line while waiting their turn. I couldn't afford more registers and staff, so we started offering free cookies and coffee while they waited. Our online reviews soared and so did overall sales. - Nicole Connors, Saku Cannabis Inc.
6. Maximize Your Highest-ROI Opportunities
Small business owners naturally want to maximize all revenue streams and accept all opportunities along the way. But some opportunities pay off more than others. Focus on ones with the highest ROI only, even if it wasn't part of the original business plan. The rest of the time should be spent on minimizing costs. In essence, run a minimum viable product until you can afford to spend more. - Anna Nguyenova, Cablato
7. Revamp Your Invoicing Processes
When a small business owner is having trouble with cash flow, it's time to review supplier contracts, revamp invoicing processes, reduce expenses and elongate payables. Ensuring client commitment by offering incentives for early payments as well as only starting any project or installing a product with a signed quotation and receiving an upfront deposit also helps cash flow on the back end. - Heather Newman, Content Panda/Creative Maven
8. Pay Close Attention To Account Receivables
Depending on your business, you may have a moderate to a large number of account receivables. If the average account receivable amount is small, then simply connecting to the client and requesting expedited payment may be sufficient. In other instances, you may need to look for financing available, based on receivables. Ask your banker for it and they should guide you in the right direction. - Beth Worthy, GMR Transcription Services, Inc
9. Borrow Money To Tide You Over
Often times the best solution is to start close to home. Friends and family may be one option to consider. Another would be a line of credit from an existing bank relationship or, if the business is sound, seek equity investors. Generally, these three groups are a good way to measure the business's viability. If they all say no, perhaps it is time to reconsider the business altogether. - Tibor Kelemen, Kelemen Company
