Vesta Digital Blog

What to do in a Cash Flow Crisis

Posted on: February 23, 2011

What to do in a Cash Flow CrisisIn the event your small business starts experiencing a lull in cash flow, you need to act fast. Even if you’re still profitable on paper, that doesn’t necessarily mean you have enough in the bank to pay the bills. Problems can arise especially if your company is successful, but your customers start slowing down their payments.

David Worrell of Allbusiness.com has a specialty in finance and managing small businesses. He wrote a great article on a few tips that can help you survive a cash flow crisis. Below are a few pieces of advice from David that may help to save your company from going under.

Know the numbers.

“In good times and bad, keep an eye on key cash flow numbers. I’m not talking just about a cash flow statement each month, but also about key ratios or metrics in your business. If you start this habit in good times, you’ll have forewarning when cash turns against you,” David says.

His advice is extremely useful in this circumstance because new business owners have their focus spread out. It’s important to keep a finger on the pulse of your cash flow because you will be able to better sense an incoming crisis and have more opportunities to prevent it from happening.

Cut your own pay. Now.

“Besides taking pressure off of cash, this will motivate you to fix the problem. If you hide behind a salary – and keep building debt, or laying off staff to pay yourself – the problem will grow worse until it is out of control. Cutting your own pay also demonstrates leadership to your team,” David says.

This fact is extremely important to running and entrepreneurial business. As a leader, you need to demonstrate how important it is to work together with your team members. If that means your employees are paid and you’re not in times of crisis, so be it. They will be more motivated to stick with you and have a deeper connection with the business. Employees that feel as though they are a part of the company – rather than just employed by it, can help take a company to a much higher level.

Distributed by IntelBuilder Social Media Platform

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