How to survive a cash crunch

Entrepreneurs at some point have to deal with cash flow problems. The problem could stem from seasonal demands, low profits, too much stock or even giving customers too much credit.

An article by entrepreneur Eernesto Gonzalez published on Forbes lists five strategies that business people can employ to come back to profitability.

First, he says, entrepreneurs should not issue many cheques as pushing more money out the door without a plan is likely to kill their businesses.

Second, he advises businesses to choose from a list of vendors, employees and creditors and select only those that are critical to the business.

“If you don’t have the money to pay everyone, you need to choose who you can pay. Once you are healthy, you can pay everyone else,” he says.

This will also entail letting go of employees that are not essential to the business.

Third, Gonzalez says, you should come up with a plan you can offer to your critical resources that allows you to keep enough cash to maintain your operations.

“It must show a win-win opportunity to your suppliers, employees and creditors. They want to know they will eventually get paid” he says.

Fourth, you should strive to maintain the trust that you have developed over the years with your employees and suppliers.

This entails remaining committed to your promises amidst the cash flow problems.

Finally, you should provide constant progress communication with vendors, employees, and creditors. “If you are going to miss a payment, make sure you let them know upfront,” he says.