Cash is the lifeblood of business. Without it a company will die. Many companies, especially those that are growing rapidly, face situations from time to time that result in cash shortages that threaten their very survival. For example, if a company finds itself in a situation where it is not able to meet payroll, there is a major problem. Sometimes those situations are the result of factors beyond a company’s control.
Here’s another not-so-uncommon event that adversely impacts cash flow. A new entrant to a market offers loss-leading ultra-low prices in order to buy market share. That has an obvious and adverse impact on the existing companies in the market and that often spells cash flow trouble.
So, what do you do when your company is caught in this kind of squeeze?
In my free guide, I have outlined the 7 key strategies to avoid a cash flow crunch. The first and most important strategy is to have a finance professional such as a B2B CFO® partner on your team. That professional will help you anticipate and plan for the possibility of a cash crunch that is not of your making before it actually happens by implementing a cash flow budget.
Second, establish a banking relationship with a bank that truly acts as your business partner. Having the right amount of a working capital line of credit available to you when times are lean is critical to avoiding a cash crunch. A good banking relationship can help you weather many storms as long as the relationship is open, honest, and based on trust. Be candid with your banker about problems when they arise but also help him/her understand where your company is headed in the longer term. Help the banker understand your projected revenues and cash flow along with existing and anticipated purchase orders and opportunities.
Another method to improve your cash flow is to shorten your collection times on the amounts owed to you by your customers and negotiate longer payment terms with your vendors as detailed in my free guide – the 7 key strategies to avoid a cash flow crunch.