Also be careful regarding the type of As a rule of thumb in business, you should always scrutinize every single penny that leaves your bank account, but you will need to be especially critical of spending during a cash flow crisis.
The recent credit crunch and recession has proved that businesses can take drastic actions to cut overheads and other costs, which immediately reduces cash outflows.
Cut stocks: reduce the amount of cash tied up by buying and holding raw materials or goods for resale.
Be honest with your vendors to negotiate payments or to inquire about delaying payments.
Although some might be unwilling to budge, odds are vendors to whom you have been loyal will be flexible and willing to work with you during a tight situation.
Another way to quickly increase your business's working capital (and also to bring in a new business partner) is to sell equity.
Like taking on debt, however, be sure you truly want or need to sell a piece of ownership in your business to solve a cash flow crisis.As experts in business bookkeeping and accounting, Growth Force helps its clients improve their cash flow management by implementing smart bookkeeping and management accounting systems optimized to help business owners and CEOs make strategic – rather reflexive – business decisions.With a smarter back office, you can fine-tune your business model, increase cash flow and improve profitability to get your business out of the financial weeds and elevate it to the next level.In terms of actions which management can take, here are the main options: Cut costs – by far the most important method of improving cash flow.Every business can identify savings in non-essential costs if it looks hard enough.Encountering a cash flow shortage should lead you to closely inspect your business plan, processes, operations and expenses.You need to determine why you encountered a cash flow shortage, whether it will be a recurring problem and you will also need to put a plan in place to handle future shortages.Before you take on business debt, however, be sure you understand the interest rates and have considered all other options and are not making a decision that will simply kick the problem down the road to be addressed at a later date.If your business has an intrinsic problem causing your cash flow crisis, then taking on debt will only put a band-aid on the problem and make the problem worse in the future.When business leaders have no strategy or plan in place for handling a cash flow shortage, a cash flow crisis occurs.In the event of a cash flow crisis, you need to be ready to take action to save your business from an untimely demise.