The economic situation has gotten cloudy. As 2023 starts, many experts are predicting an eventual recession. To weather the potential storm, you need to keep tight control over your cash flow.
Doing so could save your business. One study found that more than eight out of 10 (82%) failed businesses suffered from poor cash flow management. Especially in challenging economic times, it’s critical to protect your cash position.
Cash flow represents the life’s blood of any business. Are you doing everything possible to maximize this critical metric? Here are some tips to better manage cash flow in 2023:
Better Managing Cash Flow in 2023
Keep Costs Low
No one wants to cut costs. It’s a painful process — especially if it involves reducing your staffing levels. However, in tough economic times, it could become necessary.
Do what you can to avoid the human toll of a cost-cutting effort. Look at every other possibility before you turn to layoffs. That means pointing a microscope at every cash outlay and considering if there is a less expensive way to handle the situation.
Of course, it’s best if you can avoid cutting costs in the first place. That becomes possible by staying as lean as possible, even during good times. Having a comprehensive budgetary process lets you protect your cash flow, even before potential threats come on the horizon.
Implement Productivity Boosters
The best way to cut expenses? Learn how to do more with less. That means discovering ways to improve productivity. That way, you can sustain your organization with fewer resources. Here are a few steps you can take to upgrade your efficiency:
- Identify Obvious Waste
- Streamline Your Processes
- Look for Tech Upgrades
- Upskill Your Employees
Consider Targeted Price Increases
A tough economy doesn’t exactly lend itself to raising prices. Most of your clients will be stressed, meaning they will also be looking to reduce expenses. In a challenging market, you’ll need to keep your offerings as competitive as possible.
That said, not every part of the market reacts the same in a recession. Often a general downturn has many pockets of lingering strength. Some areas even benefit amid economic crosscurrents.
Given this dynamic, you might find potential areas of strength. Get granular about your market analysis. You might find particular areas where you have a dramatic competitive advantage, allowing you to edge prices higher.
Build a Diverse Funding Structure
Cash flow can be choppy, especially during difficult economic times. As your clients start to feel the pinch of a downturn, you could see an increase in late or unpaid invoices. This puts your company at risk, sometimes making it difficult to make critical payments.
A diverse funding structure protects you from these crisis situations. Start with an emergency fund — cash you can use if your incoming revenue dries up. Also, set up other sources of funds that can give you flexibility. These strategies include things like lines of credit and invoice factoring.
Looking for Further Help with Your Cash Flow?
It’s important to have a strong partner in these efforts. A company like Frontline Funding can give you the security and flexibility you need to protect your cash flow.
Contact Frontline to get started.