Last Updated on Oct 6, 2020 by James W
If you feel that your company is nearing insolvency day by day, it is time for immediate and prompt action. You have to put your recovery plan into action. If your business is unable to pay back debts, is struggling to pay taxes, all is not lost. There is still hope. You need to follow some steps in order to make a turnaround for your company. Some of those steps have been listed below.
Shift your focus towards loyal customers
It is a fact that not every customer is of the same kind. There are those customers who put a lot of pressure on you and waste a lot of time. They are the ones who delay the payments too. On the other hand, you have a different set of customers who are perfect, and working with them is a breeze. They make timely payments and do not over expect from you. When running a struggling business, focusing on the latter will be more advisable. This will have a positive impact on your cash flow since your resources will be utilized in the right place. Avoid taking up new customers at the moment and try getting new projects from your existing set of clientele. In this way, the money you spend on sales and marketing will be saved. Moreover, your revenue and cash-flow will improve.
Have a look at funding options
Struggling businesses are often said to be in an ‘underleveraged’ position. This implies that there is not enough capital, which is necessary for the growth of the business. You might think that it is not in the company’s interest to take up debt, but there are other factors at play too. The company may become cash-strapped if cash flow is low. Then, it becomes difficult for you to pay your employees, suppliers, and cover other expenses. If you feel that your company is not under significant debt, you might want to take a bank loan to cover the costs. If you are already under a lot of debt, try going for other alternatives to finance your company. For further help, listen to the cannot pay back bounce back loan firms.
Check up on outstanding debts
You do not want the outstanding debts to stay there for an extended period of time. It may be standard practice for outstanding debts to remain unchecked for quite some time. This can cause your company to get stuck in a cash-flow problem. Ensure that the accounts receivable does not register a growth. It can lead to insolvency in the long term. If you keep extending the time period for the repayment of a loan, there is a possibility that yet another creditor might liquidate the debt. There is also a risk of the debt closing itself with the help of a voluntary creditor liquidation. This issue can be dealt with by sending a reminder notice regularly to your debtors. If this does not work, there is always the option of hiring a debt collection company to deal with this situation. A positive step could be offering early repayment discounts to debtors to make the cashflow robust. Just ensure that your debts are paid on time by hook or crook.
This one is a no-brainer but has a lot of significance in the grand scheme of things. Most businesses suffer from a shortage of cash due to extravagant spending without keeping in mind the revenue. You can divert spending on marketing costs, operating costs, salaries, and even equipment. One way to go about this is by making redundancies and paying attention only to the core factors. Ensure that you do not spend too much on marketing. Reducing costs is an effective and proven method of transforming your business from a weak position to a strong one. In this way, the money will only be used in the places where it requires the most like in buying supplies, etc.
Give discounts to those who make immediate payments
If your business is in a situation where the cash-flow is significantly less, then you are in dire need of immediate cash. Although most companies offer payment terms of at least a month, it can be extended for up to 3 months. If you need payments as soon as possible, you can try posing lucrative discounts to customers who pay upfront or even in advance for your product or services. This can prove to be an effective solution for delayed payments. For example, give a ten to twenty percent discount to those customers who go for the early repayment option. This is an attractive offer, and indeed the majority of your clientele would not like to miss it. However, ensure that you only hand out an offer that is feasible and does not cause you losses. It should be a good deal for both you and your customers.