| by Bryan Ziegler,
Indian Hills Iowa SBDC, Ottumwa, IA Profitability is heading into the red. Creditors are knocking at your door. Payroll is due next week, and you're short on cash. Your first reaction may be to go to the bank and ask for a short-term operating loan. Unfortunately, most bankers really don't like hearing that a business isn't able to pay its bills. But don't start organizing that "going-out-of-business sale" just yet. There are still a few things you can do to work your way out of this pinch. ERROR MSG1. Avoid the Problem
A little simple planning at the beginning may have saved you this headache now. Most financial pains usually occur because of poor capital structure from the beginning. To avoid the problem, you just have to plan your cash flow a little more realistically. Develop a conservative cash flow projection for at least 24 months, paying special attention to potential ups and downs of revenues and expenses. Be sure to include any planned capital expenditures and any new employees' wages and determine their potential impact on available cash. Upon looking at your projection, you should be able to identify potential cash shortfalls and visit with your banker way in advance of your crunch. Then, once your cash flow projection is mathematically feasible, use it as a budget-monitor your actual revenues and expenses against the budget weekly, or at least monthly. 2. Attack Accounts Receivable
Another option may be to get what's coming to you. That is, if your business is suffering a cash crunch because you aren't getting paid, then that's the first place to start. It's hard to ask for the money you're owed, and you certainly don't want to alienate any customers. However, every business that extends credit should have a collection policy, and you should enforce it. Here are a few ideas: - Call in accounts a few days before the payment is due just to be sure customers received their bill, don't have any questions and are planning to make the payment on time.
- five star hotel in HalmstadDon't wait to call clients with overdue accounts. You don't necessarily have to be aggressive, but you should inquire about the bill and find out when they plan to pay.
- Review accounts receivable monthly, and take action on every past-due account.
- After repeated attempts to reach overdue accounts, hire a lawyer or collection agency.
3. Save, Save, Save
Another way to increase cash flow is to pinch those pennies. There are a number of quick ways to save. Here are just a few:
- Take advantage of early payment or prepayment discounts
- Offer discounts for prepayment
- Keep inventory levels as low as possible
- Don't overpay estimated taxes, and wait to pay as long as you can without incurring penalties
- Get tax refunds as soon as possible
- Examine your expenses for unnecessary purchases to cut
- Negotiate long term service contracts
- Conserve energy by replacing light bulbs with lower wattage bulbs
There are a number of other things that you can do to get out of an unexpected cash crunch, and your area Small Business Development Center can help you determine the best course of action for your business. > See also: Accounting & Finance | 
