We are often asked for advice and help outside what is usual for a small business POS software company. Recently, we were asked by a customer for advice on holding a cash-flow challenge. Here is an article we offer our customers on this topic. It shows the extent to which Tower Systems can help, beyond what is usual for a POS software company serving small business retailers.
Cashflow can get very tight in any small business. How you deal with it is a test of leadership.
The common approach is to hide from those to whom you owe money. That only serves to harm your business and put you under more pressure.
Here is our practical advice on how to deal with a cashflow challenge:
- Understand the problem. Know if it is short term or long term. Be certain about the role you have played.
- Own the problem. Fixing this is on you.
- Develop a plan and document it succinctly:
- To borrow if appropriate.
- To put more of your own money into the business.
- To cut overheads: labour, rent.
- To convert more stock to cash.
- Work our what free cash you have availabke from your weekly trading.
- Ensure all creditors receive payments, no matter h0ow small. Regular payments reflect your commitment to goodwill. They also show you are not playing favourites.
- Talk to your creditors, apologise, outline your plan, ask for help.
- Act. Every decision, every action you take must work to addressing the cashflow challenge. If you have created a plan(point 3 above) act on it immediately. This is not a time to overthink things.
- Invest. If your cashflow challenge is because of a decline in traffic, not spending money chasing traffic will only make the problem worse.
If your cashflow challenge is more serious than a short to medium term plan could resolve it could be that your business is insolvent.
Company directors have a legal obligation to not allow their businesses to trade while insolvent.
Many have been in this situation. You can come out the other side by acting sooner, with commitment and with transparency to your creditors.