Switch from Short-term debt to Long-term debt: Use long-term debt to finance your business instead of short-term debt. Long-term debt gives you the benefit of smaller monthly installments and lowers interest rates. The principal is also not due for repayment immediately.
Removal of short-term debt from your balance sheet allows you to have better Quick and Current ratios and allows you to save some of your liquidity in the near term and put it to better use. Get Rid of Useless Assets: Every business has unproductive assets. I am sure that yours has too. It is just lying there, wasting resources and not earning anything.
It is time to get rid of them. Try and get a good price for it. However, there are some assets that are not worth anything in the market, and you would be better off just disposing of them for whatever they are worth.
After the sale, your cash balances would go up, you do not have to account for depreciation, and the ratios would subsequently improve. Control Your Overhead Expenses: Examine how much you are spending on rent, labor, professional fees, marketing, and so on. You will be surprised how much of these are unnecessary.
Cut back on them and your short-term expenses automatically go down. The cash you are able to retain in the business also increases. Overhead expenses, including rent, advertising, indirect labor and professional fees, are indirect expenses that you incur to operate the business outside of direct material and direct labor. Unproductive assets: If you have unproductive assets that the business is just storing, then it's time to get rid of them. The only reason you should spend money on assets such as buildings, equipment and vehicles is to generate revenue.
Accounts receivable: Monitor accounts receivables effectively to ensure that you're billing your clients properly and that you're receiving prompt payments. Accounts payable: Negotiate longer payment terms with your vendors whenever possible to keep your money longer. Owner's draws: Monitor the amount of money that's being taken out of the business for non-business purposes such as owner's draws. Taking too much money out can put an unnecessary cash drain on the business.
Profitability: Review the profitability on your various products and services. Assess where prices can be increased on a regular basis to maintain or increase profitability. As your costs increase and markets change, prices may need to be adjusted as well. The cookies is used to store the user consent for the cookies in the category "Necessary".
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How do your fixed costs evolve? Are there any exceptional costs? When will your debtors pay? How much room for manoeuvre do you have on banking lines, credit insurance, supplier credit…? Create scenarios. Worst case and best case scenarios. On the short and middle term. No one knows how long this crisis will last and when we will return to normal sales levels.
Once you have completed this exercise, you will have a better view of your needs which allows you to draw up an action plan. Different options and scenarios can be weighed. If you go to an external party investor, bank or other financing to raise extra funds, it is important that you prepare a good financial plan and presentation file.
Let qualified experts guide you in this process. Implement the action plan. A good plan is a combination of actions taken in parallel, following a strict schedule. During and after the implementation, it is key to keep an eye on every aspect of it in order to make changes if needed. Measures to improve the liquidity position and financing mix of your company Take advantage of the support measures. The government is throwing some financial lifebuoys to help companies brave this severe storm.
If your company is obliged to close down, you can claim a one-off nuisance premium of euros. For every day compulsory closing after April 5, there is a compensation of euros. Make use of the fiscal options. There are three options for the social security contributions : postponement of payment, reduction of payment or exemption from your social security contributions.
For VAT returns, withholding taxes , corporate and personal income taxes , there is a delay to meet your obligations. You could also consider a payment plan for tax debts. Contact your bank in time.
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