The 21st Century Recession has not been kind to small businesses. But, while it certainly played a part in a high number of businesses closing up shop, it is also responsible for forcing some business owners into finding alternative solutions for their financial needs.
Those that were successful in doing so have been able to keep their doors open, with the hopes that calmer waters are on the horizon.
For many of these businesses, the solution was taking an old-school approach to managing their money. In other words, instead of depending on income that they have not yet received, they made the most with the working capital they had on hand, and improved their account receivables so they got paid faster and more reliably.
Here are four ways you can bring these old fashioned initiatives to your own business.
#1 – Invoice Smarter
It is surprising that more than 40% of small businesses still send out their invoices in the mail. This drastically extends the length of time between sending out the invoice, and receiving payment.
Instead, invoice smarter, and send out your invoices electronically. This not only helps facilitate quicker invoice resolution, but it eliminates the old “never received the invoice” excuse. The faster you get paid, the more working capital you will have to operate your business with.
#2 – Create a Budget
A budget is a good idea for keeping finances in check, regardless of whether it is a household or a business. Create a budget that works for your business so you can make the most out of the cash you have on hand.
Having a budget for your business will also make it easier for you to determine early on when you really need to press your customers to pay their outstanding invoices.
#3 – Save What You Can, But Do It Wisely
When you are determining how to maximize your working capital, it helps to have 30-, 60-, and 90-day forecasts of your operating expenses, so you know how much money you need to keep your business running at the rate that is required.
Any cash you have available after the forecast can be invested, but if you choose to do this, you need to do it wisely. Avoid locking your money down longer than six to twelve months. You want to be able to have quick access to it should you need it.
#4 – Be Prudent With The Cash You Do Have
When you are not practicing prudent spending, it can be all-too-easy to spend your business’s capital faster than it comes in. This will put your business in financial hot water before you know it.
When times are tough, that is when you really need to refrain from making business purchases that will not have an immediate impact on your business’s productivity or quality. Consider your purchases carefully, and look for inventive ways to cut costs throughout your business. This will help ensure that more money is available for those times when you really need it.
Photo Credit: Harsha K R, Flickr.