The lean days are when you have just started your business and the income is not huge yet. You could also apply the term to days when the company is experiencing a drop in income, probably due to the economic situation, or other factors peculiar to your industry. To keep in business, it is important to manage your fund properly. Below are some tips you should imbibe.
Establish a principle that prevents you from dipping your hands into the purse of your business at will, but rather pay yourself for the services rendered to the business. You might want to limit your pay to just what you need to go by on a modest lifestyle. Do not make the mistake of judging your pay by your last paid employment. Your new company might not have the strength of your previous employer yet.
Just in time principle
You will need to apply this principle to most of your activities at work. Do not hire staff until it has become crucial to do so. You should learn to stretch your existing staff to their limit. Make them multitask. Make them wear various hats as might be required by the business. But also learn to make them happy working for you.
Also, you should learn to delay draw-down on loans to exactly when the loan is needed. This will help prevent accruing unnecessary interest. You could achieve this by splitting your loan schedule for the year into tranches; taking each tranche as the need arises.
Balance between loans, payable, discounts and receivables
Do not be afraid to take loans; it might just be what your business needs to succeed. You should use your loans to take advantage of the economies of scale (advantages of bulk purchase) as well as the accompanying trade and cash discounts. You should also consider accruing payable.
Payables are debts you owe to suppliers and other service providers, and should be considered as informal loans without interest. However, you should consider if the cash discount tips the scale against payable. Your receivables are the credits you have given to customers; limit them to the barest minimum. A way of doing this is to encourage payment of cash by giving cash discount.
Always encourage your customer to commit through deposits. Not only will this provide you with more cash to work with, it will also reduce the rate of cancelled orders. You should ensure that your customers are aware of your policies on cancelled orders and refunds too.
In addition to securing deposits, let the customer also commit to a progress payment that is in line with the progress of the projects or services.
Provide for debts
The reality is; no matter what you do, some debts will just go bad. You should learn to provide for bad debts. This could be in form of a pool of fund set aside from your profit. However, you should try, by all means, to ensure that your debts are not going bad. So, a solid recovery plan is important.
How are you keeping up with funding? Share your experience with us on our social networks.