Cash flow restoration is critical to rebuilding your small business. Without the right cash flow, your business could stagnate or worse, face closure while facing severe cash crunch. There are many ways to restore cash flow but firstly, it is necessary to assess the current situation and find the most appropriate ways. Business situation for every small business is different and it needs custom assessment. Given below are a few recommendations to restore cash flow and rebuild your small business.
Assessment of the Situation
Start with where things have gone wrong for your business and how did cash flow reduce to a trickle? Best ways could be taking out the profit and loss statement and the balance sheet to find out the following:
Which are the areas, products or services or customers that have contributed to the lack of cash flow?
Where have the money been going?
You need to find out which are the products or services whose demands must have gone down. You can find that out by analysing the various reports and analytics if you happen to have a good small business accounting software. If you are able to find out the failing products, you can find the reasons they have failed. Secondly, you need to pull out all nominal codes and the chart of accounts to find out the expense heads. This gives an idea of where your money has been going. You may even consider hiring a professional accountant to find out what has been going wrong.
Steps to restore cash flow to your business
You can take the following steps:
Consider offering better payment plans for your customers. Your accounting software may allow you to offer more relaxed payment terms or even find out better payment terms which the customers find more attractive than those before.
Consider talking to your customers and find their requirements. You may be surprised to find that your product offerings and their requirements may not even match. And that could be one of the reasons your business has been struggling with cash flow. Solicit feedback and make plans so your products or services are more aligned to the requirements of your customers and that could mark the beginning of cash flow to your business.
Find out what your competitors have been doing when your business has been struggling. There might be some pretty good strategies your rivals have been following that has resulted in a steady cash flow to their business. You may seriously consider emulating a trick or two that can work for your business.
Your industry may have changed while your business has been struggling. It is worth finding out what has changed in the industry and what can you do to align your business accordingly.