You're having a bad cash flow month. Revenues are down, and you have bills to pay. What do you do? You have two choices in business (and in life): bring in more cash or cut expenses. In a down month, you need to do both.
Here's how.
Optimize Your Current Cash Flow
1. Focus - Don't panic. Fear makes you freeze up and switches off your higher cognitive functions. Stay calm so you can work the problem. The goal is to close the cash flow gap as fast as possible. Control your emotions and look for the positives each day.
2. Brainstorm Options - What can you do in the next 30 days? How large is the cash flow gap? Start with what has worked in the past. Can you offer a discount? Add a popular bonus? Make a referral offer? Brainstorm new options only if you have time to experiment. Choose your best options, put them on paper and then take action.
3. Create a 30-Day Cash Flow Projection - When are the bills due? How much are they? When do payments come usually hit the bank account? Create a day-by-day cash flow projection that estimates when money is coming in and going out. Put reminders on your calendar when bills are due and set the alarm. If your plan is working, you'll hit your marks and the amount of cash in your bank account will increase. Know if your plan is not working as early as possible to make adjustments.
4. Know Your Paydays - Stay on top of your client's accounting cycles. Your clients may pay at certain times of the month or take a certain amount of time to process invoices. Review your financial books to learn the patterns. Invoice early. Follow-up if they are behind. Stay on your accounts receivables. You can avoid delays by being proactive.
5. Have a Backup Plan. What will you do if you don't hit your marks? Don't assume everything will work as planned. Do some "what if..." thinking now while you have time. Missing one of your marks in your cash flow projection should trigger an action. Be ready and take that action without hesitation.
6. Connect with Current Customers - Look for no or low-cost options to bring in new revenues from existing customers. How can you be of service to your customers? Reach out to current customers to see if they need help with any projects. What are they ready to do now? You can strengthen your relationships and potentially find a project to be done.
Go Beyond Your Current Thinking
7. Look for New Opportunities - Expand your vision. What else might bring in income quickly? Can you get any new contracts? Can you do a side hustle? Can you get a part-time job? Get outside your comfort zone and discover new possibilities. If you're looking, you'll likely see new opportunities.
8. Cut costs - Think lean here. Cut anything unnecessary. Everything tied to making sales is essential and anything that you can't connect directly to sales should be reviewed. Cut it, cancel it, or reduce it. Watch the changes in net income to know if you are going in the right direction.
9. Avoid Debt - Avoid the the temptation. Credit cards and loans aren't the answer here. Debt augments profits or losses and drains cash. You want to close your cash flow gap, not digger a deeper hole. Avoid this one at all costs.
10. Build Your Toolbox - This won't be the last time you have a down month. Learn from your actions. What worked this month? What didn't? What can you do better? Take your lessons and build on them.
Keep Learning
Down months are often the results of not having a plan. Remember, there is no coasting in business. You are building up your business, or your business is declining. The work of growing your business is never done. Keep learning and keep acquiring new skills. The best way to stay out of a bad cash flow month is to never have one in the first place.
