Like death and taxes, being short on cash in January should be expected – not a surprise. As long as I have been working with small companies I have witnessed this trend. You are in good company. You may have seen your cash balance depleted from $250,000 to $60,000 or possibly needed to draw more than expected from your Line of Credit.
Why? Numerous reasons, but primarily end of the year spending for bonuses, customer appreciation, and unexpected tax bills, to name a few. Have no fear, February is here and you can expect to see your cash balances start to recover. Here are a couple things you can do to increase cash quickly:
Look at Your Accounts Receivables
Make some calls. Get on the top of the list to get paid by your cash-strapped customers.
Pull a Profit & Loss by month for the past 12 months. Look for line items that seem unnecessary and eliminate them - subscriptions to a web service might be a good example. Get rid of storage lockers or sublet space you are not using. Then, focus on your three largest expenses. Consider how you could reduce your spending in these three areas. I have seen companies easily reduce expenses by 10% with this simple review.
Review your sales process. Is the process meeting your sales goals? Are you executing your plan? If you aren't, start. If you are following the plan to a tee but not meeting your goals, now is the time to rethink your process.
Keep Your Bookkeeping Current
We see some companies that don’t really know how much money is available. Keep your bookkeeping current at all times or at least weekly. With better information, you can make better decisions. If keeping your bookkeeping current is a huge challenge for you – hire a bookkeeper. Bookkeepers can help you improve your cash flow.
Use these tips to help yourself out of an uncomfortable position today while you are setting yourself up for less stress next January.