When a small company if forced to shut down, it usually isn’t because they haven’t made profits. Most small businesses face closure because they lack quality cash flow, not because they lack profits or assets.

So what should a business owner do? They will face many different situations and be prepared for all of them.

Here are some ideas to help take on the cash flow problem:

1. Develop a written plan to increase cash flow. It’s important to involve the staff in the idea, and have specific actions plans and due dates for all items. It will be helpful to engage Filler & Associates to facilitate the process.

2. Examine inventory levels. Think of inventory as cash in the warehouse. Get rid of obsolete items by either selling or donating them. Figure out how to reduce inventory levels while keeping necessary items in stock.

3. Examine credit and collection procedures. It may be possible to make some changes that result in more cash coming in.

4. Examine billing practices. Remember that money can’t be collected until it’s billed. A good objective may be to reduce the number of days in the billing cycle.

5. Negotiate with creditors to get better terms. It may be surprising what creditors are willing to do if the issues are explained to them.

6. Examine staffing levels, compensation plans, and bonus plans. Cash flow could be improved without hurting efficiency and staff morale.  Remember to review all fringe benefit programs as well.

7. Prepare detailed cash projections. Use a “what if” analysis and be realistic.

These are only some possible solutions. The issues are complex and must be acted on with a deliberate systems approach. For some companies, it may even be advisable to consider bankruptcy. Talk with Filler & Associates for more information.