What to do if you are facing cashflow challenges in today’s economic downturn?
Cashflow is always important, but it turns critical in a downturn – because if you aren’t in charge then a poor cashflow could be the steamroller that runs over the top of your business and kills it!
Don’t panic just yet. While there’s a lot of advice out there, we’re keeping it brief and to the point. Here are four essentials to help improve cashflow during an economic downturn: knowledge, profits, collection, and action
1) Knowledge
The first step to improving cash flow during an economic downturn is understanding exactly what’s happening. That means creating a 30-day detailed cash forecast (the nitty-gritty of every penny coming in and out) and pairing it with a longer-term simplified forecast (the bigger picture).
Start by listing all your expected income, outgoings, and any large expenses lurking on the horizon. Then, compare this against your available cash. Doing this will highlight any danger zones so you can take action before a cash crunch hits. It’s also a good idea to update these forecasts regularly.
In an economic downturn, things can change faster than a teenager changing their mood! So remember – it’s about being proactive. Knowing what’s coming, you can prepare and adapt instead of scrambling to put out fires.
| Need help creating your cash forecast? Get in touch with us at [email protected]. We’re pretty good with numbers and data analysis, if we do say so ourselves. |
2) Profits
If your cash flows sinking, it might be because there’s a leak in your profitability. Are your sales generating enough margin to cover your costs? Are you getting value from your investments? If the answer is ‘Hmm, I’m not sure’, it’s time to dig deeper and make changes to improve cash flow during an economic downturn.
Take a good look at your profit margins to start. Are you pricing your products or services correctly? Are there any projects that seem like they’re eating more money than they’re making? Consider whether it’s time to trim some fat and cut unnecessary expenses, or negotiate better terms with suppliers. Even small savings add up and can boost your cash flow over time.
Or maybe you’ve got the opposite problem, you’re not charging enough! While raising prices during an economic downturn might sound risky, it could be necessary if your costs are going up. Just be strategic, look at where you can add value for your customers and clearly communicate why a price adjustment is needed.
3) Collection
You’ve done the work, sent the invoice, and now… you’re waiting. And still waiting. Sound familiar? If slow collections are draining your cash, it’s time to toughen up your payment process.
Start by reviewing your current payment terms. Are they working for you, or your customers? Consider shortening payment periods, introducing late fees or offering small discounts for early payments. Don’t forget to set up a system for polite but firm reminders. No one likes chasing payments, but staying on top of overdue invoices is key to keeping your cash flow healthy.
If you can, try asking for part payment up-front. Even getting 50% of the payment in advance can ease the strain and give you more breathing room. If you find yourself dealing with the same late-paying customers again and again, it might be time to review whether they’re worth the hassle!
| Being firm and consistent is essential to improve cash flow during an economic downturn. So let us help! We can help you automate your invoicing and collection process. Get in touch with us at [email protected] to see how. |
4) Action!
Here’s the kicker, none of this will matter if you don’t do something about it. So take action and take it quickly. Even if you’re not sure it’s the perfect solution, doing something is better than waiting around for things to improve on their own.
In business, speed is your friend. Decisions may not always show results overnight, but hesitation will cost you.
Take control of your cashflow today
Cash flow doesn’t have to be the monster under your bed. By focusing on knowledge, profitability, collection, and quick action, you can regain control and steer your business through even the trickiest downturns.
When the economy’s down, don’t let your business go down with it. Take charge of your cash flow today, and make sure it’s working for you, not against you.
Need support?
If you’re feeling overwhelmed, don’t try and handle it all alone. Getting professional advice can be a game changer so don’t be afraid to reach out. A fresh pair of eyes can be all it takes sometimes to uncover new solutions. If you need our help then just contact us [email protected]
