How Can You Keep Yourself Away From Cash Crunch?

• Reading Time: 7 Minutes
• Published: October 18, 2020
• Last Updated: January 23, 2025

COVID-19 pandemic has greatly roiled the waters for business owners to sail upon. Each and every business carries its own rewards and risks. Adopting a turnaround strategy for keeping business afloat is a difficult task but cash flow is one such thing that stabilizes the current business position and regulates smooth running of business.

Cash flow is described as the amount of money that flows or moves in and out of business in one month. Customers buy products or services from you in exchange for cash which results in cash coming in the business. But, in some cases, cash is not paid at the time of buying any product or service, that is compensated by the accounts receivable. You make payments in the form of mortgage or rent, payment of taxes and other loan payments which result in cash going out of the business. These cash flow requirements can easily be looked after by accounting US firms.

How Creating a Proper Payment Structure Helps in Smooth Running of Business?

Payment deadlines should be kept in mind

Dates should be put in writing for encouraging accountability and keeping you and your customers on the same page. Prefer to use the same deadlines for all customers. In this way, expectations are set.

Early payment discounts must be offered

Offering early payment discounts will promote your customers to pay you on time. In this way, you can fill your pocket with the incoming cash flow much sooner.

Late payment fees should be charged

This concept is feared by most customers which will encourage the customers to pay before the deadline. Only thing to notice is that it should be mentioned in the contract that you are going to charge late fees if the cash is not received on time.

How Can You Survive in This COVID Scenario, If You Are Facing a Cash Crunch?

Installment loans- Taking installment loans are associated with a significant buying of a particular item. For example, if a business wants to buy a new equipment, bank will finance that equipment into regular installments contract. This would decrease the burden on the business as it would not need to spend a big sum together.

Line of credit loans- Businesses can borrow line of credit to fulfill their payment needs with this predetermined amount. After paying it back, businesses can borrow it again.

How Can You Track Your Availability of Cash?

The best way to track cash flow is the cash flow statement. From this statement, you can get to know your business’s cash position, i.e. the amount of cash received and paid in a month. Due to different requirements of businesses, you might need to check cash flow maybe weekly or even daily to get proper cash flow status.

Studying cash flow is an important component when you are starting a business because there many expenses against no payments. Then you need to opt for a temporary line of credit to keep your business afloat. Seasonal businesses must also manage cash flow with due diligence because it can become tricky. This can be effectively managed with the help of top accounting firms US such as Whiz Consulting. Enough cash is a basic requirement to avoid a cash crunch, so opt for their services.

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