Manage your cash flow
Many small business owners do not review their numbers regularly or believe that their finances are accurate. Still, “cash is king” is true for all businesses. You can look great on paper, but if you mismanage your cash flow – you become cash poor. This can make it hard to get any financing which could ruin your business. Use your cash economically – poor cash management is very risky.
Obviously, American Finasco is a proponent of paying your debt if you can afford to but when you can’t, you need to be realistic about what you can afford. Here is an example:
We had a prospect that owed $800,000 to unsecured creditors. He was in the midst of a downturn in his market and didn’t want to lay off any workers so he kept borrowing money and stretching out creditors. We looked at his financials and proposed that we try and settle the debt for $400,000 on a payment plan with no interest. He could afford that payment. But he said, “No way, I pay my debts”. He didn’t want any of his creditors to lose money because of him. I applaud that sentiment but it can only be implemented if you can afford it and he couldn’t. He didn’t hire us and about 18 months later he called us back and was in an even unhealthier financial situation. He now owed $1.7MM to unsecured creditors and his cash flow was worse than before. We had to tell him we couldn’t help him because there was no realistic way to settle that amount of debt based on his current or projected cash flow. He was forced to file bankruptcy and went out of business. He called us back and said, “I wish I had listened a year ago.” Because he didn’t understand the numbers, instead of losing $400k, his unsecured creditors lost close to $1.7 million.
Managing cash flow and being realistic go hand in hand. If you find yourself with substantial debt, consider leveraging American Finasco. We can manage, reduce, or consolidate your debt while you stay focused on your business. Visit Contact Us and complete our Online Form for a free consultation or call (800) 299-2909. We look forward to speaking with you.