What To Do In Case Of Cash Flow Disruption

Businesses have been forced to adapt considerably over the past year, and whilst many businesses have been able to continue trading in one form or another, there have often been consequential effects on their profits.

For most businesses,?financial liquidity?and cash flow are the most important measure of its health, as it highlights how easily money can be generated and indeed spent by a business.

If a business can easily generate and spend money, then this is typically a good sign of financial flexibility, as they can continue to function even in situations where their ability to generate revenue is affected whilst the business seeks advice from cash flow consultants.

If your business is currently facing disruptive issues with its cash flow, here are some important steps to take.

Identify All Of Your Obligations

Comprehensive knowledge about how your business stands financially is critical to weathering any financial situation. Make a report of all of your financial liabilities.

These are your financial obligations to others, such as leases, employment contracts, contracts with other businesses, liabilities and your taxes, as well as any loan repayments you have agreed to make.

Prioritise these in order of importance, seniority and flexibility.

Record All Revenue Sources

Take an in-depth look at your current operations and how much money they are generating, as well as how much they may be worth if they are sold off.

One mistake quite a few businesses make when they are in financial trouble is to sell off too many revenue-generating assets, leaving them unable to effectively restructure.

In difficult financial situations, haste is not always the best solution.

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Transparency Is Key

When discussing your financial situation with your key stakeholders, there is no benefit to trying to mask your situation.

Let them know the reasons for your disruption and be ready for any questions.

In general, communications with stakeholders include being candid about what business disruptions have taken place, with documentation of current cash flow, financial statements and where you feel your financial position will be in the short to medium term.

Finally, have a detailed plan for how you plan to continue operations and manage your debt and work with experts on the best and most realistic way to accomplish this.