Solving a Cash Crisis: Part 1

Posted by Lake Superior Community Partnership on September 30, 2013

As we enter the last quarter of 2013, many of us in business are fortunate enough to be looking into 2014 and preparing for the future.  Some of us may be faced with the burden of an immediate cash crisis.  While there are no easy fixes, there are strategies to deploy and steps to take to get your business’s financial train back on the tracks.  If your business is faced with an immediate cash crisis, the first (and most natural reactions) are to panic and then ignore the problem.  Your first step is to fight these reactions and start facing the issue head on.

Now that you’re committed to solving the problem you need to get organized and gather all of your financial information in one place.  Get help if you need it.  It doesn’t matter if its software, a ledger or a shoe box (though the goal will be to move away from the shoe box), it just needs to all be in one place so that the pieces of the puzzle can be put together.  Just as there are no easy fixes, there are generally no easy answers as to what caused a financial crisis.  There are financial service providers throughout the area that specialize in these issues as well as low to no cost services available through organizations like the Lake Superior Community Partnership and the Michigan Small Business and Technology Development Center.  Your information needs to be organized so that you can make an objective list of problem areas and set priorities for collections and payables.

As you’re going through your organized books, look at your accounts receivable.  Are there outstanding balances?  In other words, do people owe you money?  Collect, as soon as possible.  This isn’t comfortable for anyone, as a business owner, it is likely your least favorite task, which is why it often gets left for last.  But, remember, your creditors will have no problem demanding payment from you and you will not be able to pay them if your customers haven’t paid.  Also, look at your invoicing process and procedures.  Can they be tightened up?  Can it happen more quickly?  Can you tighten credit policies to protect yourself in the future?  It may also be time to look at firm credit and invoicing policies for all customers, which can also be uncomfortable from a social standpoint but necessary from a business point of view.  Once you get out of this situation, the goal is to never end up here again.

If you haven’t gotten a professional involved yet, now will be the time to do so.  Having someone review your accounts will help you set timeframes for cash management and projections so that you can move on to the next step in the process and find out how this situation occured.  It may be hard to believe, but we’ve made it through the easy part.

In my column two weeks from now, we’ll cover dealing with your creditors, adjusting your pricing and reducing your costs.  We will also get into general accounting practices and checks and balances.  From there you can start looking into the future.

In the meantime, if the LSCP can assist with anything, please call our Business Development team (906.226.6591) or visit our website (www.marquette.org) under Business Resources.

CEO, Amy Clickner, writes this bi-weekly column for the Mining Journal.