Dwindling Cash Flow Is A Problem

By Karlene Sinclair-Robinson

To any business owner, Cash Flow is KING. Small Business owners know this. Everyone knows this.

Business owners today are tapping into whatever available cash reserves they have. This is not always the best thing to do but they might not have an option. Survival is the primary reason entrepreneurs are using their cash reserves. It is vital to stay afloat and be able to come through our current economic situation that is affecting many.

Unfortunately, for many small business owners, their cash flow is dwindling. This is a fact for many, not just small businesses. Why is this so? Take a look at the news today and you can find the answer to this question. Many business owners have to make adjustments based on reduced consumer spending, business-to-business payment defaults, and government taking a longer time to pay their invoices. These are all factors attributing to many business owners falling back on whatever little cash reserve they do have.

Accessing their cash reserves for a short period is one thing, but going back to it numerous times leaves them in a precarious position during times like these. This is even harder for the small business owner. When they do not replenish the business cash reserves or see a way to do so in the near future, they are walking a tight rope with the likelihood of going into a negative cash flow situation or even worst.

Dwindling cash flow does not make for a great outcome if the cash reserves cannot be replenished within a given time or the business owner cannot see a way of making this happen. Situations like this could result in the business owner having to reduce the number of hours they are open for business, possibly lay off employees, or even worst, close their business for good.

In light of the current economic situation and the business cash flow position, business owners must determine what has to be done to help them during times like these. How to go about this is not always easy to do. Figuring out the components that can work together to benefit the business is vital.

10 Factors to Consider During a Cash Flow Crunch

1. Assess how the business currently operates.
2. Assess how the business uses current resources.
3. Assess what the business pay for the goods and services needed.
4. Determine if the business requires all the supplies, machinery, and/or equipment you purchase or services you use.
5. Assess outstanding receivables position.
6. Assess the business’ growth potential into new markets.
7. Be sure to assess the added skills the staff can bring to the business.
8. Assess the business’ borrowing power through traditional sources.
9. Assess whether it is time to seek Alternative Financing even before you exhaust all other avenues.
10. Assess alternative sources and financing programs that can get you to where you want to be.

Once the business owner has gone through this exercise, they can then make adjustments to determine going forward. The possibility exist that the business could be in survival mode and still be okay based on spending habits or how the business owner facilitates being paid for goods or services. This is a good time to look at the goods and services offered and determine how to diversify the business effectively. Once you get back on track, be sure to model this process so that the business does not end up in the same situation again.

If the business owner must access working capital through traditional or non-traditional means, they can better identify the type of source best suited for their current needs. Knowing the immediate, short-term, and long term needs of the business early on will assist the business owner during times when cash flow is a problem.