You crunched revenue and expenditure numbers, put together a realistic financial plan, and yet, you're facing a shortfall.
The first thing to do is try to refrain from panicking. Shortfalls are a part of running a business, and until entrepreneurs can look into a crystal ball and predict the future, they're going to continue to happen. If you're facing a shortfall, it doesn't mean you or your company is looking at the end of the line. In fact, there are some tried and true business practices you can employ to help manage the issue and get things back on track.
According to Entrepreneur magazine, the key to managing cash shortfalls is to identify the problem as early as possible, as this will give you more time to deal with it.
Your first port of call should be your financial institution. That said, banks are good at recognizing when shortfalls are a result of failed planning and don't tend to take kindly to borrowers who urgently need money and waited until the eleventh hour to ask for it. Arranging for a line of credit at your community bank or other institution ahead of time allows you to borrow money if and when you need it – up to a preset limit, of course. This is considerably easier than appealing for funds when you're already short.
Additionally, try reaching out to your suppliers, especially if you enjoy a good working relationship with them, have a history of making payments on time and have kept them in the loop about your finances. Suppliers – who, after all, have a personal stake in keeping your company going because it means more business for them – can give extended terms that essentially amount to a low-cost loan, the news source notes.
You could also consider selling or leasing assets and asking your best companies to accelerate payments. However you try to make up the shortfall, prioritizing bill payments is crucial.
"Don't just pay the smallest ones and let the rest slide," the source advises. "Make payroll first – unpaid employees will soon be ex-employees. Pay crucial suppliers next. Ask the rest if you can skip a payment or make a partial payment."
Financial services advisers at My Bank are happy to assist entrepreneurs who are either currently grappling with shortfalls or anticipate dealing with cash flow issues in the future. Drop by your local branch for a face-to-face conversation, or give us a call at 1-888-mybank4.