Are you having trouble paying some of your regular business expenses? Have you been faced with a sudden, unexpected expense that is threatening your cash reserves? Here are a few suggestions about paying your small business bills when the budget gets tight.
1. Communicate early and often.
You don't want to wait until your vendor or lender penalizes you or calls you about a missed payment. As soon as you suspect you won't be able to make your expenses for the month contact your vendor or utility provider to let them know the situation. Rather than express concern about long-term profitability, simply inform them about the current issues that may interfere with a timely payment. Ask for a few days of additional time to make the payment and then make certain that you can deliver the payment within that time frame.
2. Try to negotiate a new trade agreement.
If your main expenses are vendor payments to suppliers or wholesalers, you've probably been operating under a revolving agreement that may follow a 30 or 60-day account term. Contact your vendor and ask about altering the terms of your trade terms such as requesting a discount for fast payment or lengthening the time limit of your payment window.
3. Assess your business's needs.
Has your cash flow been declining in recent months? Now is an ideal time to re-assess how your business spends money. Can you cut back on nonessential expenses each month? For example, reducing overhead such as office rent, supplies and unnecessary services can boost your cash flow immediately, making it easier for you to meet your expenses.
4. Look into other financing sources.
It's important to seek out new lines of credit before you run into serious financial difficulty. If you miss several vendor or utility payments your credit rating could take a hit which will make it very difficult to qualify for additional credit. Inquire about corporate credit at local banks, learn about invoice factoring or open up a few business credit card accounts. However, you'll have to use your credit wisely to avoid incurring unnecessary debt which could also strangle your profits.
5. Follow up on unpaid customer invoices.
A simple way to increase profits is to follow up on unpaid invoices or to renegotiate payment terms with your customers. If you have a few clients that keep a line of credit open or routinely ask for more time to pay their invoices, contact them to encourage them to clear their accounts in full as soon as possible.
In a tight economy, it can be hard for entrepreneurs to meet their regular expenses, especially if sales begin to slow. These five tips can help you in paying your small business bills even if your cash flow shrinks.