When you own a small business, even a minor financial setback can become a major problem. Often, small businesses do not have the cash flow to handle when the economy takes a swift downturn, an employee embezzles cash, or a fire destroys part of their inventory. When a financial crisis strikes your small business, there are steps you can take to help minimize your losses and get your company back on its feet quickly.
Identify Cash Bleeds
The first step in handling a small business financial crisis is to identify what is known as “cash bleeds.” These are areas where your business may be losing money unnecessarily. It could be as simple as liquidating products that are no longer turning a profit or advertising that is providing little or no return on your investment. A review of your expenses for the past three months as well as detailed information about sales and profits should highlight cash bleeds fairly quickly.
Accept Debit and Credit Cards
It is surprising how many small businesses still do not accept credit and debit cards for payment. Many business owners think that the fees for accepting credit cards are too high, yet they ignore the fact that only taking cash or checks, paying staff to fill out deposit slips and drive to the bank, waiting for checks to clear as well as the high cost of a check returned for non-payment is much higher than a credit card fee charged by a processor. When customers are offered easy methods of payment, they are more likely to return to that business.
Talk to a Financial Adviser
Financial advisers are trained to review financial information and identify areas that may improve cash flow. Banks often have staff who can perform a review, often at no charge to business customers. If your bank does not offer such a service, contact your local Small Business Administration who may offer assistance at no cost. Even if you cannot find a financial adviser in your area that will provide their service for free, the cost of an adviser is well worth it if they eliminate your financial problem and keep your small business open.
If the financial crisis is temporary, such as a seasonal slowdown in sales, you may benefit from short-term funding sources. The first step is to contact your bank to see what may be available to help you move past the minor problem. If you are not successful with your bank, there are many lenders who specialize in business financing. Although it is very expensive financing, same day loans—like the payday loans in Dallas, TX—and other such payday advances can be the perfect solution to resolving a temporary financial problem. It is important to remember that finance companies and other short-term lenders charge very high-interest rates, so it is in your best interest to repay the borrowed money as quickly as possible.
Close Part of the Business
If your business has multiple services or product types, review which are the most profitable. Those that are no longer turning a profit, eliminate them in order to condense your company. For example, if you own a lawn mower company that offers repairs, parts and lawn cutting services, you may find that there is no longer a market for lawn cutting services in your area. Eliminate the service, liquidate the equipment you used for that service and move those employees to other areas that are profitable. Although this may appear to be a major loss on paper, you could find that your financial crisis has been eliminated and your cash flow improves.
A financial crisis in a small business does not necessarily mean the business will fail. By following these easy steps, you may be able to avoid a worse crisis and get your company back on its feet quickly.