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7 Hustle-Friendly Ways To Overcome Cash-Flow Problems

Cashflow in Kenya

If I was told to name one “disease” that kills most small businesses in any part of the world, I would without blinking an eye name – the cash flow disease. It is like a cancer that chokes an infant before it even makes its maiden step. In fact, poor cash flow is the main reason why 20 per cent of companies started today will not make it to 2018, and why 50 per cent won’t survive past 2020. Unfortunately, the solution to cash strain does not lie in any classroom textbook and neither does it rest with any blog article. However, by identifying a few quick, street-wise tricks, we can figure out a few possible ways to tame this age-old problem.

(1)Start Making Your Payments by Cheque; Not Cash

Cheques normally take a few days to be processed giving you that much-needed extra time to plan your finances. Best still, if you are in a tight situation and are sure to raise some cash later, you can write a post-dated cheque. In that case, your post-dated cheque acts as a promissory note to anybody you may be owing money. The only thing you need to make sure is that there is money in your bank account by the time the cheque matures. Note: It’s illegal to write post-dated cheques knowing very well you don’t have enough cash to cover that cheque when the time to process it comes.

(2)Make Your Cheque Payments Near Weekends & Major Holidays

This is yet another street-wise trick that can help you buy more time from your creditors so you can put your business in order, financially-speaking. If you hand over the cheque say Friday at 2pm, most Kenyan banks tend to postpone its clearing process onto Monday. So you get three more days (weekend included) to plan and make all the necessary cash deposits. The trick here is actually not to avoid paying but to buy a few more days to enable for better planning. Remember, time is the most important resource in a business – and the more time you have on your hands, the better.

(3)Be In Good Books With Your Suppliers

Nothing can kill a business faster than being in bad books with its suppliers. Honesty is the keyword when dealing with suppliers – because by being honest they are able to trust you easily even when giving you goods on credit. So if you run a supermarket, and you have good suppliers, you don’t have to worry about re-stocking your shelves as they can always give you goods on credit and you pay them later. Likewise, if you get a big order from one of your favourite customers and you don’t have the cash to process it, you simply run to your suppliers and leverage on your trust to get things done. That way, you end up securing yourself some interest-free capital to pay later and still meet the needs of your customer.

(4)Raise Your Prices but Give More Value

The biggest mistake small business owners, especially newbies make, is to think that the only way to compete is by slashing down prices. In reality, customers are more concerned about getting good value as opposed to cheap prices. The sooner you realize this and start focusing on building loyalty by offering good value, the better. Charging higher prices means you can get bigger profit margins which also makes it easy to ensure consistent cash-flow for the business.

(5)Talk With Your Bank or Sacco

Keeping all the money in the cashbox instead of depositing it and building a solid bank statement is another mistake small entrepreneurs make. Whatever little money you make, make sure you take it to the bank. Usually, the longer you operate with a certain bank or SACCO, keeping clean records, the easier it is for them to loan you when things get difficult. Financial institutions offer a myriad of solutions such as LPO financing and bank overdraft facilities which you can tap into to unlock cash-flow in your business.

(6)Ask Your Customers to Pay Deposit

Besides serving as an indication of how serious a customer is, a deposit can actually help you get out of deep financial quagmire. The only thing you need to do is to cultivate an environment of trust so that your customers can trust you enough to pay in advance. Keep in mind that there are some fraudsters who move around requesting customers to pay “a deposit” only to disappear with all the money without delivering the agreed product/service. These are unfortunate times, and if you really want to rise above the rest, you must be prepared to work in an honest manner.

(7)Introduce Fines for Late Payments

Desperate times call for desperate measures. If most of your customers are dragging their feet in making payments, then you have to pull the trigger. Make it clear in your rules that payments made beyond a certain date attract a penalty – and be firm on that. Let there be a signed agreement between you and such customers. If somebody doesn’t want to play by the rules, you simply forego the deal and work with the little you have.

Final Word

There is no problem in this world that does not have a solution. But given the fact that many small businesses are going under due to cash-flow problems it is imperative to be armed with a few survival tactics to enhance your game. Remember, at the end of the day, it’s not the strongest who survive but those who are flexible enough to deal with emerging challenges.



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