Managing your bills when cash is tight, and preventing cash from becoming tight to begin with

Photo by Tima Miroshnichenko on

We’ve all gone through periods when cash is exceptionally tight, and chances are it’ll happen again from time to time. It’s just how it is, especially for SMEs. These are tough and testing periods, but there are measures you can take to ease the pain, and sometimes even prevent it from happening all together.

Communication is critical

Chances are your vendors and service providers are experiencing cash flow issues themselves, particularly if the reason for yours is a pandemic or an economic downturn. Therefore, the sooner you inform them that your next payment will most likely be delayed, the more they can prepare themselves and take their own measures to deal with their problems. They’ll appreciate you all the more for your forthcoming honesty, because there’s nothing worse than finding out that there’s no money coming from your end when it’s already too late to scramble.

Give a little bit to everybody

Instead of paying off a few vendors or service providers entirely, negotiate temporary partial payments so you “partially” please as many as possible and keep your relations intact. Even a small amount is better than nothing at all, and your vendors will appreciate your efforts in working things out with them. And they won’t forget it either.

Don’t make promises you know you can’t keep

Remember how people back in the day used to say “yeah, the check’s in the mail?”. Well, that didn’t fly then, and it certainly won’t fly today. When you reach out to your vendors – or they have already contacted you for payment – never ever make empty promises just to get rid of them. And don’t make promises you’re not really sure of either. First of all, you will hurt their business because they are most likely to make promises based on yours. And secondly, they will call back sooner and later, but this time much angrier and less willing to work out terms.

Keep an accurate and realistic budget

This is actually quite easy to do. You know what and how much your fixed expenses are, such as rent, salaries, utilities, loan payments, etc. You should also have a pretty good idea about how much revenue you can expect over the next few months, because you have contracts on your books with agreed upon payment schedules. And those will tell you what and how much you can expect in variable expenses. Last part, your business development team should be able to give you reliable and realistic numbers for their projected new contracts they will sign soon. So putting this all together and adding how much cash you have currently available, you will see how far into the future your cashflow will dip below zero, so you can plan ahead and take proactive actions to prevent that from happening.

Spend your money wisely

As there are times when we have little or no cash, there will be times when we will have some extras in our account. Hopefully the latter happens way more often than the former. But these are times we feel we deserve a pat on our backs and go out and buy something nice. Maybe a few new computers? Some new office furniture? That gorgeous 60-inch TV for the conference room? Or better yet, how about trading up the company car for a newer model? Well, don’t! Before your spend money that doesn’t need to be spent, take a look at your cashflow projections. How does it look like five months down the line? How does the line shift once you plug in that purchase you’re contemplating, especially If it’s a monthly subscription?

Multiply monthly payments by twelve

Monthly subscriptions and payments are particularly tricky because they silently creep up at you. A JD50 here, another JD75 there, and you don’t even think of it as an expense worth worrying about. Try this though; before you commit to any monthly long-term payment, multiply it be twelve. So that JD500 monthly payment for the new car is now suddenly a hefty JD6,000 that’ll drag your cashflow line significantly down. Even that JD50 monthly subscription fee becomes a considerable JD600 over the year. So, did you really need it or could you have easily done without it?

Dump Clients that at a burden

This is a particularly tough one, because nobody wants to dump a source of income, right? Unfortunately though, sometimes we get trapped with a client who never pays their bills on time, even if they have money. Their projected payments render your budget and cashflow projections unreliable, and they end up causing more damage than good. One might think that they’ll pay eventually, so why not tough it out? Well, this only works if you don’t have to worry about your cashflow. In reality though, clients needs resources, especially human resources. And those need salaries and expenses. So tying those up with slow paying clients will only hurt you on the long run because you’ll have to hire more people to service your good clients properly. Plus, you’ll get into some toxic relationships which you really don’t need in your life. So rip off the bandaid, fire them, and move on to better things.

About the Author

Pinnacle Business & Marketing Consulting is a results-driven boutique consulting firm that specializes in providing clients with practical and pragmatic solutions to their business and marketing challenges. For more information about us, please visit our website.

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