A struggling economy. Troubles in your industry. Challenging times in your target market. At some point or another our organizations will probably face difficult times. (I would argue that for many organizations, now might just be such a time.) Your job as a leader is to keep your head and manage through is. Better yet, you should be prepared for it. One critical place to begin is to focus on cash management. So, what are some ways to go about that? Here are a few suggestions that you should be thinking about to strengthen your organization’s cash position.

 Watch the Outflow

Of course you have to get those bills paid. But there are a few ways to get that done andkeep a few more dollars in your bank account longer. A few steps you can take:

• Use the situation as an opportunity to build team cohesion. Be open and honest with them. Let them know you are all in this situation together and will pull together to survive it. Keep a calm and level head.
• Scrutinize bills to make sure no mistakes are being made. You’d be surprised how often there are billing errors in your accounts. And you may be surprised how much those errors can add up to.
• Know your payment terms with vendors and pay your bills as close to the deadline as possible.
• Tighten up spending. You might consider looking at your policies around authority levels for spending. Scrutinize and limit spending on supplies, meals, travel, etc.
• It’s very important to lead by example. Leaders need to watch their own spending. What sort of a message does it send when you ask your team to tighten their belts and then you fly to your next meeting first-class? Believe me. They are watching.

Earn Some Interest

Get creative with your bank. Talk to your banker and see if your accounts can be shifted to interest-bearing accounts. It may also be possible to find low-risk investment funds where you can park excess cash. Just make sure that the funds are liquid enough that you can get your hands on it as quickly as you need them. For instance, don’t tie funds up in a five-year CD if you might need that money before that.

Look at Recurring Payments

We all have them. Those subscriptions that auto-renew regularly or that we renew without giving them much thought. As an example, my Wall Street Journal subscription creeps up on a regular basis. And every once in a while I start to notice and call them. Pretty much every time, they are able to reduce my cost. So where do youhave accounts like that? Here are a few places to start looking: periodicals, Internet, cable, web hosting, etc.

A few of these may also offer you a discount if you pay in advance; for instance if you pay for a full-year or for multiple years. If you have the cash in hand now, it might make sense to do that to remove expenses when times are tougher. Sometimes that doesn’t make sense. You don’t want to draw down your cash too far.

Collect Quickly

The other side of the coin (I know, bad pun!) is to bring cash in the door more quickly. Tighten up your collections process by reviewing your receivables more closely. But remember to be customer-sensitive, of course. And by that I mean, be tactful, be polite, be customer-focused. We’re not treating our customers like deadbeats; we’re simply trying to bring the cash in a little sooner. As an example, if your organization typically sends out reminders 60 days after an invoice is received, maybe move that up to 45 days. (Oh, and by the way, if you typically mail your invoices, consider shifting to an electronic method. Email those invoices (or a link to their invoice) to deliver it in seconds instead of days.)

If it makes sense, consider offering a fast-pay or advance-pay discount to your customers.

Plan Ahead

One of the most impactful things you can do to ride out difficult times begins much earlier. Make it one of your primary goals to have at least three to six months worth of operating funds in reserve. That way if (and when) challenging times do arrive, you can weather the storms for a few months; giving you time to adjust the business to the new circumstances. When times are good we all want to roll money into growing the business. But it’s important to be prudent and set aside these  “rainy day” funds.  Make sure you put the company on a saving plan and set aside cash when times are good. Build up a good reserve.

A line of credit can help smooth out the ups and downs businesses can face. You draw on it only when you need it. It’s typically used for short term working capital to help improve cash flow, or to finance the costs of unexpected expenses.

Don’t wait until it is too late. Like so many things, the best way to handle tough times is to prepare during good times.

Forecast Cash Flow

Related to what I just said above; never forget that cash is truly king. One important tool for planning ahead is a cash flow forecast. Take the time to develop a one-year prediction of how cash will move in and out of the business. It will show you where cash balances might be at certain points in the future. That way you can prepare for any cash shortages. Begin with your current cash balance and schedule out receivables and payables (using conservative, realistic assumptions) and their impact on your cash position.

It’s always critically important to keep the cash flow positive. And that can be exponentially more challenging when times get tough. But difficult times don’t mean that it’s time to panic. Plan ahead and prepare. Implement your plan and stick to it. The tough times will pass and you and your team can come out the other side stronger than ever.

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