If you find yourself in financial distress, there are a number of simple steps that you can take to manage your situation. The steps below are by no means a one size fits all approach, but provide one approach to managing your financial situation.

If in doubt, you should always consult a financial professional.

The action plan is a 3 step process;

1. Deal with the history – Before you can make any decisions on your business, you must understand the scope of your debt. Enter all your unpaid invoices into your accounting system, so that you can see the ageing of your outstanding debt. Once you understand the scope of your problem, consider contacting your debtors to set up payment programs for outstanding debt. Most suppliers will be happy to agree a payment plan, in the hopes of recovering some of the debt. Be sure to make your payment plans realistic, you don’t want to agree a payment plan that you again can’t keep to.

2. Think about the future – it may sound obvious, but you need to consider actions to increase income and reduce expenses

   1. Reduce your Expenses.

      1. Non-Sacrifice Savings – these are savings that do not result in sacrifice. You keep doing what you are doing, but you find a way to do it cheaper. Look around for alternative suppliers, put major bills out to tender, bulk buy, take advantage of discounts.

      2. Sacrifice – take some harsh decisions – do you really need to buy or spend each item? The sacrifice may be temporary, but superfluous spending must be reduced. Identify what the minimum running costs are, and cut out everything else in the short term.

   2. Increase Your Income

      1. Maximise current income streams – review pricing, and look at ways of increasing customers. Cross selling with your existing client base is a good way of increasing your income with little effort.

      2. Look at additional income streams – what else can you do to raise money?

      3. Grants, support and donations – look at what support or grants may be available to assist in financial hardship times, and what discounts and support you can call in. If you are experiencing cash flow issues as a result of outside economic forces, such as a recession, there are often government help options available.

3. Make some hard decisions - Job Cost all transactions, so that you can easily see which elements of the business are making money, and which are not. It may be that some hard decisions are required – some services simply may not make money, and are a financial drain on the organisation. In the future, you may be able to support non-income generating services, but in the interim they may need to be suspended. Potentially, you may need to look at selling off assets to pay any outstanding debts.