The recent Silicon Valley Bank crisis sent ripples through the world of small businesses, startups, and venture capital. Thankfully, the crisis was mainly thwarted by getting bailed out and addressed by calls for regulation by the Biden administration. But it set enough investors on edge to recognize that it's not the first crisis to affect businesses, and it certainly won't be the last.
Here's how your business can find cash and stay resilient in a crisis.
Find Hidden Cash in Plain Sight
One of the biggest challenges of a bank collapse is losing access to funds. The economy is quick to react to a potential bank failure with businesses and individuals attempting to withdraw their funds of out fear. One way to strengthen your company's resilience is to understand where cash may be hidden within your finances so you can gain access to cash.
- Review and reduce overhead including software or other tools that are no longer being used.
- Pursue potential upsell opportunities or reduce project delays to increase sales revenue.
- Look to negotiate better prices with suppliers or find lower-cost alternatives.
- Improve accounts receivable and collections processes.
Clean Up Accounts Receivable
It's not uncommon for late paid invoices to be put on the back burner, especially if they're not a high dollar amount. Those back-burner invoices start to add up after a while. Here are a few ways to clean up your A/R process to find cash within your business:
- Audit your existing receivables and debt collections processes.
- Invoice your clients regularly and set reminders to run aging reports.
- Follow up on unpaid invoices, no matter how small.
- Make contact with clients before their invoices are due.
- Review your credit policies and identify consistently late-paying customers.
- Research your bank records for missing deposits and match them with invoices.
Solidify Your Debt Collections Process
If your accounts receivable process is not up to par, your business may also be lacking a solid debt collection process. Within your collections process, you will define:
- The roles and responsibilities required for maximum efficiency
- Recommended invoice timing and what to include on invoices
- A list of accounts payable contacts within your clients' businesses
- Credit standards and credit policies for clients, including credit reporting on new clients
- When to follow up on invoices and how
- When to escalate the account to third-party collections
The best way for your business to stay resilient in a crisis is to discover where you can be more efficient. If there are any lessons to be learned over the past few years, crises tend to highlight disorganization or wastefulness. Use this time to pay attention to the details and find cash reserves hidden within your company's finances.
