Small business owners often face unplanned cash flow challenges. It may be because they lost a key client, have a large outstanding client payment, experienced machine break-downs, or even unthinkable situations such as a national lockdown due to a pandemic, while their fixed expenses are still to be paid. This was the focus of a recent episode in the IBASA & EPI Webinar Series titled“Practical tips to support small businesses to bridge cash flow gaps due to the pandemic and the holiday period”, where Peter Magner of Iridium Business Solutions joined webinar hostsChristoff Oosthuysen and Thobeka Poswa, along with IBASA MD Mpho Mofikoe.

The following are ten practical tips for addressing a cash crunch, which were identified during the webinar:

  1. Negotiating credit terms with suppliers to allow for late payment. Often SMEs just accept supplier terms, especially when suppliers are big businesses, without negotiating.
  2. If you sell on credit, start to take deposits/part payments, while offering small discounts for early account payment by clients.
  3. Cut your business costs to remove non-essential expenditure while ensuring you do not compromise delivery or quality.
  4. Adjust your lifestyle to reduce your salary needs. This was highlighted as often one of the most difficult actions to take, as this is directly linked to people’s egos and how they want to be perceived.
  5. Step up your marketing efforts — especially those with little cost implications. Entrepreneurs often make the mistake to cut back on marketing expenses, thereby compromising their income potential.
  6. Add easy-to-use client payment options such as a credit or debit card facility. Or online solutions like Paypal and EFT.
  7. Invoice through a factoring house to unlock cash before clients pay or factor a portion of your debtors when cash flow is constrained.
  8. Apply for a bank loan or other bridging finance. Even though this might often require more formal application procedures, it can also benefit the business in proper self-analysis on the intrinsic health of the business.
  9. Explore alternative lending from family, friends, or other peers. This is often the cheapest funding and should be explored first. Be careful however, this could also impact negatively on personal relationships if things go South.
  10. Revisit the business model to create new value and income streams. This is fundamental and should be done regularly (at least annually), whether experiencing a cash flow crunch or not.

This very important topic soliced lots of discussion and sharing of insights from the panel and attendees. The reality is that a crisis puts a business under pressure, but also offers an opportunity to improve the business and its resilience. It would be worthwhile to watch the full video of the webinar <<here>>.

 

  • Carel Venter is the Producer of the IBASA & EPI Webinar Series and Partner at the Entrepreneurial Planning Institute (EPI). 
  • Watch the webinar replay << here >>. 
  • Register for the next webinar scheduled for 28 January 2021, titled “Self-care as an essential element in supporting others” <<here>>.