A cash flow crunch can be like a freight train, you see the danger from afar, and you try to stop it but it has an inertia of its own. A crisis can endanger a company, it is enormously time-consuming, and often put a company out of business. On a personal level, like any crisis, it stresses out the owners, the employees, and emotionally drains everyone involved.
However, there are several actions that can be taken to reduce the tension and save your company. First, calm down and try to stay positive. The situation is what is. Angry or self-pity emotions cloud your thinking and reduce the energy that should be directed to the problem.
There are three steps that can help owners survive a liquidity crunch, I call them the three C’s of crisis management. They reduce stress and emotions, help you focus, and possibly resolve problems to allow your business to survive.
1. Calm
2. Calculate
3. Communicate
Here are some exercises that can help:
· Use “square breathing,” breath in for 5 seconds, hold the breath for 5 seconds, breathe out for 5 seconds, and then refrain from breathing in for 5 seconds. The time can vary based on your breathing capacity, but don’t physically stress yourself.
· Sit and stand erect, don’t let the gravity of the moment affect your posture. Many studies show that posture affects emotions and your self-image. If you let your body posture reflect the stress, then you could enter a spiraling emotional decline.
· Slow things down some, do not attempt to do everything at once. Instead focus on the key, critical tasks.
With a focus on critical tasks, it is time to calculate. Calculate the amounts owed and the deadlines. Some bills can be postponed, even though you must pay a penalty. Other vendors offer no leeway. Figure out where you have leeway and make a sequential list.
Vendors with some possible leeway:
· Net 30-day invoices
· Some credit cards
· Insurance payments
Vendors with little or no flexibility:
· Utilities
· Phone service
Finally, communicate with your vendors and creditors. Don’t just let the phone ring when they call. Engage with them, explain the situation, and ask to negotiate. Better yet proactively call them and work a payment schedule. Smart vendors and creditors realize that getting their money a little late is better than not being paid. Then recalculate and execute.
Going through a liquidity crunch is no fun, it is absolutely exhausting. However, follow these tips and you should be able to work things out and survive.