How can I weather a cash flow drought?
Cash flow is the lifeblood of a small business. When less cash is coming in, you must find ways to minimize cash going out. Here are three cost-cutting ideas to consider:
Review your rent or mortgage – Now might be an appropriate time to talk to your landlord about renegotiating your rent. Or, if you have a mortgage on your property, consider refinancing. If some staff members are working from home or you are conducting more business online, you may also rethink how much space you actually need. Co-working spaces – offices where you share meeting rooms, internet and expenses with other tenants – have continued to grow in popularity, especially for start-ups or for those that are uncomfortable taking mass transit to get to their “regular” work location. These shared spaces are experiencing their own unique challenges, however, regarding social distancing and sanitation parameters. Shared facilities used for warehousing and shipping are also great for economizing your business. Downsizing your space or sharing them with others will help you save money on utilities, cleaning and other operating costs.
Consider leasing (rather than buying) equipment – Equipment and vehicle leases rarely require large down payments, and often times, need no upfront cash outlay. Given their minimal initial expense, they have less impact on cash flow and liquidity than other forms of financing, enabling you to preserve cash for day-to-day operations. Because lease payments are a business expense, they can usually be written off on your taxes, too.
Audit your supply chain – Compile a list of your vendors and service providers, and then go on a competitive shopping trip. While cheaper is not necessarily better, you may discover opportunities to save on everything from insurance to advertising costs. Your suppliers, too, may be experiencing cash flow concerns and might be willing to renegotiate their fees, even if only temporarily, to maintain your partnership. They may also be willing to provide a discount for early payment on invoices. A small investment of your time could save hundreds or thousands of dollars.
The Bottom Line: Now is the time to examine every line item in your business’ budget. The ability to “trim the fat,” coupled with early payment discounts, electronic payments and other cash-flow enhancing tools, can help small business stay afloat during these trying times.
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