Money Talk: Having a cashflow crunch?

Times are tough right now for many fashion businesses, leaving more than a few struggling under reduced sales and mounting bills. Matthew Nolan offers tips on overcoming this cashflow crunch in your business.

Managing cashflow in any business at the moment is a difficult balancing act. Even veteran business owners are experiencing the fear of not having enough cash to meet immediate needs.

Given these issues, a new approach to dealing with expenses is needed to avoid adding to the problem. This starts with a number of proactive strategies you can employ to make the payment of expenses more effective for your business.

Negotiate

Take full advantage of creditor payment terms, which might include discounts for earlier or upfront payments of goods or services. Moreover, negotiate to extend terms where possible - this will help free up your cash for other payments or purposes.

Delay

If things are looking particularly grim, try delaying your payments to the very last date possible. But keep in contact with your creditors so they know that you haven't forgotten about them and you're not being evasive.

Pay electronically

To buy yourself a little extra time, try and make all payments via electronic funds transfer (EFT). Through EFT you'll be able to leave payments to the latest possible due date; you'll also have records that make account reconciliation easier.

Diarise

An up-to-date diary of pending commitments will help give structure to paying your expenses. This might include insurances, car lease payments, rents, salaries and other fixed regular costs. Any major one-off payments should also be included. Scheduling these costs will help identify and prioritise payments and help ensure you have available funds when due.

Communicate

Keep in touch with your creditors. Open and transparent communication will make it far easier to negotiate an extension should you find yourself faced with a cash shortfall. Most creditors will be willing to make alternative payment arrangements as long as you're pro-active.

Manage shortfalls

If faced with a cashflow shortfall, you'll need to explore options to cover the gap. If you know that you're going to struggle to meet the cost of your expenses, first and foremost try and cut down to the bare necessities. Then consider additional outside sources such as investors and financiers.

The fashion business in Australia will eventually return to more normal levels. Remember that the current crunch is probably also affecting your suppliers, competitors and customers. This means that if your business avoids any undue impact of this temporary situation it will be well placed to compete and thrive in the future. Through engaging expense management strategies, your business will be well positioned to better manage it's cashflow and be best positioned to survive in the current market.