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What Happens When A Business Runs Out Of Cash

A business running out of cash is like a boat running aground. If you’re passionate about either, seeing it will bring you close to tears. The reason both are so sad is because you know this is often the end of dreams, and hope, and untold hours of hard work. If you are onboard it can devastate you.

I normally try to avoid nautical analogies, I know they can be tedious, but I think this is a good way to see cash flow problems.

It’s serious trouble when bigger boats hit hard land, they are not like a tinny you can drag up on the sand. Bigger boats are subject to wind, waves, currents and tides at the best of times, but when they are close to land there is less room for error. Sailors call this sea room. They also talk of a lee shore, meaning the stretch of land the elements are driving you towards requires you to take extra care. Waves go up and down, reducing the depth of water under the boat near the shore. It all gets more and more difficult the closer you get.

If the worse happens, and the boat gets stuck aground, if it’s low tide, perhaps you can float off on the high tide, but you have to hope that the other elements will not cause such damage that it will sink where it is. Amazingly boats can be better salvaged if let gently sink to the bottom in calm and slightly deeper water.

Sadly, a lot of businesses are stuck aground right now. There is no doubt this is a very low tide, and no-one is sure when it will change. Certainly not by Easter.

There is obviously work for you to do estimating sales, debtors, wages, incentives, costs, delayed costs (such as rent and taxes) and cash from government benefits.

Regardless of all of this, although you need to do it all, it will only be sales that will save you in the end. Cash flow problems are only ever a manifestation of profit problems. And profit problems are the sum of project/task profits. If you do need to borrow money, tie it to sales by using one of the smart new invoice financing options like Waddle .

I know it’s hard right now but you have to sell your way out of it. In some ways it’s easier not having to travel so much for meetings and to the office.

When you think about it, we have all been adapting to a fast changing world for a long time now, remember when we were told that jobs for life were going to disappear, it wasn’t that long ago. The sort of people reading this have been reimagining client offerings at least every two years. That old fast paced reality has just got crazy fast – but we know what to do. Most employers are struggling letting people work from home, you are ahead of the pack if you know what a blog is.

I have noticed a change in peoples attitudes in the past week, they are thinking about opportunities. And that is what we all need to do right now.

Use wind and currents to steer to deeper water.

 

 

Photo by Nick Jio on Unsplash

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