Control Your Cash Flow
Here are 5 ways to reduce your vulnerability during the credit crunch.
By Elizabeth Wilson | August 14, 2008
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Control Your Cash Flow - Entrepreneur.com
With a credit crunch and many banks tightening up or eliminating lines of credit, it's important for business owners to maintain a steady cash flow. Here are five ways experts say you can start the process:
- Diversify your revenue stream. Relying too heavily on one source for a majority of receivables is one of the largest areas of vulnerability for NCG Consulting owner Natalee Greene's clients.
"Even if a small business has a client that's unlikely to go out of business, such as a federal government client, small businesses should ensure they have no more than 25 percent of income generated by one source. You can diversify by industry, department, product sold or other factors, depending on the nature of your business," Greene says.
- Cut back excess spending and protect your cash flow to meet payments. "Stay in touch with statements electronically," says Elena Sisti, founder and chairwoman of Savoy Bank in New York City. "Actively manage the money that's due to you, so you don't have collection problems."
- Cut costs whenever possible. "Really look at your own cash position. Negotiate better terms with vendors and accept credit card payments," Frank Baldassarre, president and CEO of e3bank, says.
- Raise capital in innovative ways other than traditional banking. "If you accept credit cards, there is something called a merchant advance where a third party will come in and review what your revenues have been and advance you capital today that you pay back in anticipation of future credit card receipts," says Deborah Osgood, founder of BUZGate, a business networking site.
- If you have excess cash, you should be leveraging it. "If banks are tightening up their credit, use it to borrow what you need as collateral, and have it in capital investments you need to grow the business. Having it in cash is useless unless you have disbursements on an ongoing basis," Osgood says.
