management

Would your business survive a cash flow crisis?
When a downturn starts to gather momentum, even companies making healthy profits can experience cash flow problems. Some of your customers may be less able to pay on time – or at all. And when your sales are strong, you may be tempted to spend less time chasing debtors. So just when you need cash to replenish your stocks or recruit extra staff, there is no money coming in.

What steps do you take to prevent such a cash flow crisis in your business? Recommended strategies include the following:

• Make sure your various departments meet regularly to talk about what they are doing, so that their activities don’t conflict.
• Coordinate your marketing and sales efforts with product availability, and target customers who are able to pay quickly.
• Shorten the time lag between sales and cash collection, e.g. by keeping track of outstanding invoices and sending out reminders.
• Delay payment to suppliers if you have to – but let them know. And if you promise to pay by a certain date, keeping that promise will help to preserve your good relationship.
• Try to keep idle inventory to a minimum.

How did you cope with your last cash flow crisis?

And if you’ve never had one, what’s your secret?

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