How to Combat the Chaos of Cash Gap
As the Covid-19 pandemic unfolded, the impact to businesses was unimaginable. The entire economy was in shambles at all levels. Businesses closed for months and even those that were still open struggled to get customers through the door.
However, there were businesses that thrived and continue to do so.
Why? They implemented key strategies to combat the chaos.
A key strategy I worked on with my clients was to reduce or eliminate their cash gap. A cash gap is the number of days between paying for goods and services and the payment from your customers. Let’s face it, cash flow is vital to your business during these times. Cash gaps can be compounded by any number of things such as drop in sales, customers paying late, and…a PANDEMIC.
That’s why it is critical to have a plan.
The goal – REDUCE or ELIMINATE the gap!
The best way to understand the gap is by reviewing your cash flow statement every month. This is the clearest and quickest way to getting in front of your cash gap. You’re able to see the flow of money through your business.
The Cash Gap Plan is designed to quickly collect your outstanding receivables, get your customers to pay faster, and negotiate better terms with your vendors so your bank account always has plenty of cash in it.
There are numerous ways to eliminate the gap:
Incentivize your customers to pay faster
Reduce your payment terms
Pre-sell products and / or services
Defer fixed payment and payables
Cut inventory – inventory on a shelf is waste
Prepare a 13-week cash plan
Create a cash cushion
As the graphic below shows, a successful cash gap plan should achieve a zero or negative gap.
It takes work and a plan. However, the work to implement the plan will pay dividends for your business and give you peace of mind.
If you’re experiencing problems in your business related to time, team, or money, please don’t hesitate to reach out to email@example.com or click to schedule a complimentary 30-minute BLiTZ Coaching Session.