Increase Your Odds of Survival
Cash flow is the lifeblood of any business, and like any restaurant, the survival of yours depends upon it. More money going out than coming in can spell your demise in a matter of weeks, not to mention threaten your ability to pay employees. And that’s what makes negative cash flow a crisis to any small-business owner. To increase your odds of survival, here are some things you should implement right away to see you through the situation.
Negotiate Your Accounts Payable
This is quite possibly your biggest stress point right now, because regardless of sales, you still have the same stack of bills to pay each month, including rent, utilities, and suppliers. When you’re in a bind, finding ways to reduce, postpone or even eliminate payments can help you free up enough cash to continue operating.
- Pursue a forbearance, or interest-only payment.
- Restructure the loan or lease to lower your monthly payment.
- Enter a payment plan.
Keep in mind, the type of loan or agreement you have can make a difference on the type of relief you can access. Your credit score and payment history can also have an effect. Banks also have different policies and approaches when it comes to working with borrowers who are in hot water. Whatever happens, being proactive and notifying them immediately can be more beneficial than waiting until you fall several payments behind schedule.
Reduce Expenses
Now’s the time to take a top-down look at your business, and examine every dollar that you spend. Your goal is to cut expenses you don’t need, zeroing in on what allows you to continue operating and earning revenue.
- Examine your menu. When paring down your menu, you’ll want to weed out expensive, low-margin items. How many entrees and apps have a unique, but pricey ingredient that doesn’t show up in any other dish? Unless it’s your signature entrée that draws a crowd, consider cutting it. Focus on streamlining your menu so you can optimize all your ingredients.
- Negotiate terms with your suppliers. Longtime suppliers may be willing to work with you to reduce prices or allow you to postpone payments for a few months.
Increase Your Accounts Receivable Efforts
If anyone owes you money, focus your efforts on identifying all your outstanding payments, and start collecting them.
- Request deposits from new customers: During this time, when someone books your services or venue for catering or events, now’s the time to request some payment up front to hold their place. Or consider increasing the amount of the deposit, or offering a discount for anyone who pays in full upfront.
- Send invoices more frequently: Many small business owners sit down once a month to create their invoices and send them off. Increase the cadence to biweekly or weekly. Because the sooner people get their bills, the sooner they’ll pay you.
- Focus on past-due accounts: If someone is late on their bill, it’s time to follow up. Don’t be shy about getting on the phone and asking (politely) when they can issue a payment. Then follow up with an invoice. Make it easy for them by offering to accept a card payment over the phone. What if it’s been several months or even a year since you last tried to get a payment? Call them anyway; you just might catch them at a time when they can make good on what they owe you.
While there’s no magic bullet solution to managing cash flow through a crisis, being proactive with your lenders and pursuing the solutions that have been made available to small-business owners can keep you afloat during challenging times.
