Low Cash Flow: A Survival Guide

by Erika Napoletano

Wouldn't it be wonderful if every month gave your business a predictable revenue stream? To most business owners, that sounds more like a Disney movie than reality. However, the smart and seasoned business owner can survive even the lowest of cash flow times. If you'd like to turn that fairytale into a reality, you don't have to become an expert in animation.

Here are four resources for when cash flow falls short:

The No-Brainer: Business Savings Accounts

Oh yes, you've taken the high road. You invoice on time, you're up to date on your vendor payments, yet when cash flow is down, you don't know where to turn. The solution could be establishing a business savings account, not unlike the savings account your parents opened for you as a kid.

Business savings accounts can give you the cash flow you need from your own company. For every incoming payment, put a certain percentage into your business savings account. Before you know it, cash will be ready and waiting for the tough times.

Best scenarios: Business savings accounts are solid, year-round strategies that can help you survive seasonal cash fluctuations and slow-paying receivables.

The Standby: Lines of Credit

An on-demand line of credit can see you through unforeseen financial stalls. These can be both short term and long term. Your best bet is sit down with your business banking professional and review your business's needs and scenarios.

They'll be able to help you establish the line of credit that you can tap into when the need comes knocking. To get the skinny on business lines of credit, seek out trusted and objective resources. For instance, the Small Business Administration has great guidance.

Best scenarios: Lines of credit are ideal for unexpected cash shortages and can even be used to finance inventory demands for busy holiday production seasons.

The Survivor: Business Loans

While lines of credit are reusable, business loans are lump sum disbursements that fund your business when the need arises. Whether you're funding business growth or tiding yourself over between a management transition, a business loan can give you a rapid cash infusion and the flexibility to pay that amount back over a predetermined time frame.
If you're trying to decide between a business loan and a line of credit, the Houston Chronicle gives you a side-by-side comparison to help you figure out which might best fit your business needs.

Best scenarios: Business loans can be a good choice when growth is on the horizon and they are a longer-term solution than lines of credit. They can help businesses increase production, hire key talent or complete a product that will replenish your cash flow.

The Flood: Squeezing Cash from Inventory

If you're a retailer, you know what your bread-and-butter offerings are. And your customers know that (most likely) they rarely go on sale. If you're finding your business in a cash crunch, why not look to your staple products as a source of cash infusion? A simple and well-timed email campaign with a discount deal can bring a flood of cash in when you need it most. The Business Owner also recommends looking to excess inventory as an opportunity to squeeze cash back into your business.

Using the lush times to save for the lean ones, building a relationship with your business banker and leveraging your inventory can all help businesses maintain a healthy cash flow. Perhaps that Disney-like scenario doesn't have to be so far from a reality after all.


About This Author

Erika Napoletano

Erika Napoletano is an author, columnist, speaker and branding strategist, hailed by Forbes as a “spinless spin doctor.” She's a twice-published author, including The Power of Unpopular (Wiley 2012), a columnist for American Express OPEN Forum, an acclaimed speaker from TEDx Boulder 2012, and speaks at conferences across the U.S. on the inherent power of truth in business… or as she refers to it, the power of unpopularity.


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