When running a small business, finances can often be tight, especially when you’re going through a crisis period. Getting into financial difficulties, for whatever reason, doesn’t have to mean the end of the road for a company.
There are many successful businesses that have managed to steer themselves out of a crisis and continue trading. When you’re facing tough times, here are some tips on how you can tackle different financial situations.
Too much debt
Many small businesses require a certain amount of financial support to develop or to expand, but this needs to remain manageable. If the debt levels increase too much and you can no longer manage the monthly repayments, it can begin to affect the day-to-day running of the business. In these circumstances, it’s important to deal with the situation before it becomes worse.
Paying off your debts as quickly as possible is a good way of turning the situation around. In the short term, you can look at all the areas of expenditure and make cutbacks wherever you can. It’s vital that you don’t make so many cuts that it impacts on the long-term viability of the business. However, decreasing your operational costs will free up more cash to cover your repayments.
If the business has extensive debts, it could be beneficial to look at refinancing options. Debt consolidation can help to reduce monthly payments, by combining all your existing credit into one amount. This could lengthen the repayment period, which might be helpful in the short term but means that the debt is hanging over you for longer.
Cash flow difficulties
Businesses require an adequate level of cash flow in order to operate. If the finances are not managed correctly, this can result in overspending and it could lead to a company being incapable of paying bills or wages. This is why getting your commercial debts collected fast is important. Cash flow problems can also arise in well-managed companies as a result of losing a client or a sudden increase in costs.
If you believe that the cash flow difficulties are only a brief problem then you should start by limiting spending on non-essential areas. This could include putting off any capital spending plans, such as investing in new equipment or a larger office. At a time when you’re struggling with the day-to-day costs, you need to focus on succeeding in the short term, as opposed to investing for the future.
Cash flow issues could be a significant problem for the business and put its entire future into jeopardy. This situation calls for more radical measures to be implemented, such as restructuring methods.
It’s important to call in experts, such as Suzzanne Uhland, before it’s too late. Suzzanne is an expert in business restructuring and has supported clients in bankruptcy cases and restructuring transactions to help turnaround the companies. This way there are more options available, including restructuring your debts to make them more manageable or making changes to your structure or operations that will save money through the payroll or release cash from the sale of some of your assets.
Invoices not paid
Customers are the lifeblood of a business and without them you wouldn’t have a viable company; however, they can also damage the financial standing of a business if they fail to pay their invoices on time. With small businesses running to such tight finances, it’s vital that their payments are made as soon as possible. Otherwise you will have to spend time chasing up their accounts departments and it could put your in a difficult financial situation if they become even later.
If you’re having difficulties in getting specific customers to pay, then it may be time to consider putting their accounts on hold. Often, other small businesses will wait as long as possible before having to pay invoices. This ensures that they don’t have cash flow problems, but it doesn’t support the companies they are trading with. However, if you threaten to cut off their supply of goods from your organization or stop providing them with services, they will be more likely to start paying.
If you can steer your company out of a financial crisis and don’t go under, it will stand the business in good stead for the future. Often getting yourself out of a difficult situation is all about taking your time to make decisions and not rushing into anything that could make the problem worse. This will ensure you make the right choices and do what is best for the long-term stability of the company.