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What to do in a Cash Crunch
If you are in a cash crunch right now, here is your immediate action plan:
Get on the Phone: Pull your accounts receivable report and start calling. Don't just send another email; call your customers today to chase down those outstanding payments.
Move Your Inventory: If you’re in retail, now is the time to bundle slow-moving items or offer discounts. I know business owners hate the word "discount," but remember that 50% of something is much better than 100% of nothing. Also, stop restocking until you’ve cleared some space on those shelves.
Pause and Renegotiate: Look at your debt payments and software subscriptions. Call your lenders and ask for extensions. My number one rule is that you must always make payroll, so do what you have to do with other obligations to ensure your team is paid.
To stop the cycle of stress, I recommend these long-term strategies:
Start Forecasting: You need a cash flow forecast that tracks the timing of money, not just revenue. This doesn’t need to be a complex spreadsheet; you can do it on a napkin, as long as you are tracking when clients pay and when your own bills are due.
Secure a Line of Credit Early: Apply for a line of credit before you actually need it. This allows you to use it strategically during slow weeks or months and pay it back once cash flow improves.
Optimize Your Terms: Ideally, you want your sales to be "due on sale" while you maintain longer terms (like Net 30) with your vendors. This creates "free cash flow" that stays in your business longer.
Use Milestone Billing: If you do project-based work, bill for regular milestones rather than waiting for "percentage of completion". This prevents clients from delaying your payment by putting off their feedback on a project.
Build a Three-Month Reserve: Calculate your total monthly operating costs and make it your goal to keep at least three months of expenses in the bank. Once you have this cushion, you can finally focus on true growth and taking risks.
If you need help setting up your forecast or building these reserves, please reach out to me—all my contact info is in the show notes. Let's build that cash flow confidence together!
Preventing Future Crunches
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By Shelby AshleyIf you are in a cash crunch right now, here is your immediate action plan:
Get on the Phone: Pull your accounts receivable report and start calling. Don't just send another email; call your customers today to chase down those outstanding payments.
Move Your Inventory: If you’re in retail, now is the time to bundle slow-moving items or offer discounts. I know business owners hate the word "discount," but remember that 50% of something is much better than 100% of nothing. Also, stop restocking until you’ve cleared some space on those shelves.
Pause and Renegotiate: Look at your debt payments and software subscriptions. Call your lenders and ask for extensions. My number one rule is that you must always make payroll, so do what you have to do with other obligations to ensure your team is paid.
To stop the cycle of stress, I recommend these long-term strategies:
Start Forecasting: You need a cash flow forecast that tracks the timing of money, not just revenue. This doesn’t need to be a complex spreadsheet; you can do it on a napkin, as long as you are tracking when clients pay and when your own bills are due.
Secure a Line of Credit Early: Apply for a line of credit before you actually need it. This allows you to use it strategically during slow weeks or months and pay it back once cash flow improves.
Optimize Your Terms: Ideally, you want your sales to be "due on sale" while you maintain longer terms (like Net 30) with your vendors. This creates "free cash flow" that stays in your business longer.
Use Milestone Billing: If you do project-based work, bill for regular milestones rather than waiting for "percentage of completion". This prevents clients from delaying your payment by putting off their feedback on a project.
Build a Three-Month Reserve: Calculate your total monthly operating costs and make it your goal to keep at least three months of expenses in the bank. Once you have this cushion, you can finally focus on true growth and taking risks.
If you need help setting up your forecast or building these reserves, please reach out to me—all my contact info is in the show notes. Let's build that cash flow confidence together!
Preventing Future Crunches