Sustaining your cash during the credit crunch

Since many banks have decided to crack down on their lending policies, it can leave your business in a vulnerable position. What will you do if you need money to finance a new piece of equipment or machinery? The credit crunch can cause you problems if you aren't careful. You must have cash reserves to fall back on during hard times, especially if banks don't want to lend you the money. Here are some easy ways in which you can sustain your cash flow during the credit crunch:

Keep it diverse
If you put all your eggs in one basket, you are bound to struggle somewhere along the way. You need to put your company's money into multiple sources to stay safe and protected. It's a good idea to keep a percentage of your credit card sales and put them right into a savings account. This increases your cash reserves so you actually have something to fall back on.

Another big part of keeping your business diverse also comes down to marketing to a new audience. It's important to market to your existing customers as they will make up 80% of your revenue stream but you do need to focus on marketing to new customers as well in order to keep a diverse customer base to work with. Some customers will have larger pockets and can afford to spend more money with your company where others can only afford to pay for smaller orders here and there.

Watch your books
Track your books daily to make sure everything is okay. If you are awaiting payments from customers and you have some larger invoices to pay to your vendors, it can really throw your books out of whack. Keeping an eye on your books is your best option to make sure you are sustaining your cash flow and that you aren't going to bounce checks to your vendors.

Cut your spending
A big part of sustaining your cash is to watch where your money is going. Cut your spending in order to have enough money to pay for the necessities of the company. Cutting back your spending will also help you negotiate better payment terms with vendors so you have a little more time to pay your bills. Negotiate with your credit card companies to reduce the interest rate on your credit cards; this will save your company a ton of money.

Update your business plan
If you find that you need money in the future and you don't have it waiting in your cash reserves, you will need a quality business plan to convince a lender to offer you a loan. Not only will a business plan help you as you are trying to get a loan, it will also help you with marketing and other things. A business plan is basically a roadmap for your company. It allows you to see what lies ahead for your company and you can set goals on how to achieve the larger goal. Updating your business plan helps you to adapt for changes and other things that are coming with changes in the industry. As you update the business plan, lenders will recognize the value in this and they will reward you with better loan terms if you are approved.

Collections
If you have extended credit to your customers, you are going to need to enforce collections. Raining the interest rate on their invoice or calling in their invoice will help you acquire the money you need quicker. This way you won't be strapped for cash when you have a large order to make with your vendors.