What should I do if my businesses cash flow comes up short?
Even when you regularly track your business's cash flow, there will be times when cash comes up short. That's simply a fact of life in operating a business. There are a number of things to prepare for these times. Note, that the key word here is "prepare".
- Prioritize your payables: Make sure that you've prioritized all of your typical payables upfront before you hit the cash flow wall. For example, payroll should be placed very high on your list of payable priorities. A vendor who's prepared to give you 45 days to pay, shouldn't be paid on the 30th day when cash flow is tight. And, consider any late payment penalties you may incur as part of your priority decision making.
- Organize a business line of credit: Arranging a business line of credit to see you through some of your cash flow lows works as a good safety net. Make sure that you go looking for your line of credit during your times of good cash flow, not when you're experiencing problems. Banks and traditional lenders get nervous if you can't show them some strong financial history and forecasts.
When you've worked through the above scenarios and cash is still coming up short, consider factoring your accounts receivable to keep your cash flow strong and healthy.