Large companies have the means to use sophisticated tools to improve liquidity and optimize their working capital. Small business owners have to rely on their own creativity and resourcefulness to squeeze out liquidity when cash is tight. I’ve listed a few ideas. What else have you tried that has yielded results?
- Freeze all purchases except for essentials. Make sure you are reviewing all purchases/purchase orders.
- Ask your customers to allow you to electronically debit their account when due (hey, its worth a shot).
- Increase prices on items that might not be sensitive to competition.
- Cut extraneous telephone services – e.g. caller ID, extra lines, separate fax line, special long distance packages, etc.
- Ask suppliers for concessions – lower fees or price concessions.
- Eliminate overtime pay.
- Outsource non-core tasks.
- Clamp down on your inventory; know what you have and know what sells.
- Drop ship from the manufacturer if possible/applicable.
- Negotiate harder on contracts.
- Ask for early payment discounts.
- Slash prices on slow-moving inventory.
- Apply laser focus to your AR collections. Call within 48 hours of due date if invoice is not paid. Discuss problem credits at least weekly.
- Send bills out more frequently.
- Solicit bids on purchases.
- Issue invoices immediately upon providing service.
- Do not pay bills early.
- Negotiate time payments on large orders.
This is hardly an exhaustive list and as a small business owner, you may already make a habit out of some of these techniques. Your customers and vendors understand times are tough and they expect a little pressure. Make sure you are not becoming your customers’ banker by providing them unwarranted credit. Also put your vendors on notice that they should expect you to try to negotiate every last dime. Hunker down (my favorite phrase) and let’s all try to get through this together. Peace out.