3 Tips to Combat Cash Flow Issues Now

We’ve been working with a client who a few months back found themselves in a real spot of bother when it came to cash flow.

They were experiencing a sales slump which was heightened by some negative business events which were outside of their control. This perfect storm lead to a complete depletion of cash holdings in the business. Gone were the savings or cash buffers that once existing and these unfortunate business owners found themselves in unchartered waters with growing ATO debt, unpaid suppliers putting them on stop supply, and the inability to restock a warehouse with their top selling items. They had entered a vicious cycle and without quick action they knew they would be faced with ruin.

When we assessed all of the factors at play the number one priority for everyone was to get cash in and fast. It wasn’t about major structural or process changes. Sure, both were needed but right now they weren’t going to keep the business afloat. Quick wins were what we needed.

We immediately started working on a cash flow forecast. It wasn’t anything fancy, just enough to know what we had in the pipeline in terms of cash receipts and payments. We were then able to identify where we’d have gaps to be filled and what we could afford or commit to pay creditors.

Cash wasn’t going to be generated without stock, so the next step was to get on the phone with suppliers, explain the situation and request an extension of payment terms or a payment plan that we were committed to meet. Most suppliers are happy to play ball so long as they’re kept in the loop. Therefore communication was key. If circumstances were to change and for whatever reason one of the agreed payments couldn’t be made, they got on the front foot and kept the other party informed every step of the way. 9 times out of 10, they’ll be more than happy to work with you.

This also applies to the ATO. They just want to get paid, so keep them in the loop and they’ll work with you.

From a quick walk through the warehouse and review of stock on hand we then generated a list of slow moving stock. Two days later the team had put together some promotional materials around these items and shared them across their email list, social media channels and started contacting customers who had previously purchased these items to see if they were interested in a deal. Within a week, sales increased by 20% and stock that would otherwise have sat in a warehouse was quickly converted into cash. Sure, these items were sold at a lower margin, but in that moment it wasn’t about making a huge profit, it was all about generating cash.

To give them further breathing space, the owners then arranged a line of credit. Nothing crazy, but enough to ensure they could get crucial stock in the door and pay wages in the coming weeks. We then factored in the repayments of this debt into our cash flow forecast.

A few months on, this business isn’t out of the dark but they’re on the right path and cash is slowly growing. Further changes will be required in the long term but things are heading in the right direction.

So what are the key takeaways?

1. Forecast - Get complete visibility around your situation so you can take control and make informed decisions.

2. Communicate - Keep all key stakeholders informed. It’s not in their best interests for you to fail. If they know what’s going on, they’re far more likely to work with you.

3. Quick wins - Long terms actions won’t help you right now. Act quickly to get cash in the door.

If you’re experiencing some cash flow difficulty and need help navigating your way through, touch base with us at info@brambleandbriar.com.au.

You can download a copy of our free cash flow template from our online store.