Managing Cash Flow Challenges After Expansion
I am the finance manager at a small business. We’ve recently expanded our operations, but our cash flow hasn’t caught up yet. I’m finding it hard to manage expenses and ensure we meet payroll, all while continuing to grow. My team is concerned about the financial instability. What should I do? Please advise using 7SFS system.
Here’s how you can address the cash flow issues while managing expenses, meeting payroll, and maintaining team morale using the 7 Steps Fulfilment System (7SFS):
1. Celebrate & Be Grateful
Acknowledge Your Success:
Celebrate the fact that your business has expanded, which shows growth and potential. Recognise that expansion, while creating short-term financial challenges, reflects the overall progress of the business.
Express Gratitude:
Be grateful for your team’s commitment during this financially challenging period. Acknowledge their hard work and trust as the company navigates through this phase.
2. Align Your Fulfilment Vision
Reaffirm Your Business Vision:
Align your team with the company’s long-term goals of sustainable growth. Remind them that while there are temporary cash flow issues, the vision remains strong and the company is moving forward.
Set Immediate Financial Priorities:
Reassess your short-term priorities, such as ensuring payroll, meeting critical expenses, and maintaining cash reserves, while keeping growth plans realistic and sustainable.
3. Know Your Win
Define Success for Cash Flow Management:
Success in the short term is maintaining liquidity, meeting payroll on time, and ensuring critical operational expenses are covered. Focus on what is essential to keep the business running smoothly during this transition period.
Conserve Cash:
Focus on strategies that help preserve cash flow, such as deferring non-essential expenses, negotiating longer payment terms with suppliers, or delaying discretionary spending.
4. Know Your Client's Win
Understand Your Team’s Concerns:
Your team’s win is ensuring financial stability and job security. Recognise their anxiety about cash flow issues and the potential impact on their salaries and job security.
Communicate Openly and Honestly:
Hold a transparent meeting with your team to discuss the current financial challenges, the steps being taken to manage cash flow, and the long-term benefits of the recent expansion. This will help reduce fear and increase confidence in the management.
5. Sign Win-Win Agreement or No Deal
Negotiate with Stakeholders:
If possible, negotiate with suppliers, vendors, or lenders to extend payment terms or seek short-term financing solutions to ease the pressure on cash flow. These negotiations can help balance short-term challenges with long-term stability.
Engage the Team:
Collaborate with your team on cost-saving measures and operational efficiencies. Involve them in identifying areas where expenses can be reduced without sacrificing growth, which can foster a sense of shared responsibility.
6. Deliver with Excellence
Prioritize Critical Operations:
Ensure that key business operations continue to function at a high level, even if some non-essential activities are put on hold. By maintaining operational excellence, you continue building momentum and customer trust.
Explore Short-Term Funding Options:
Consider short-term financing or credit lines to cover essential expenses like payroll. This can provide breathing room while you wait for the expanded operations to catch up with cash flow.
7. Achieve with Joy
Celebrate Small Wins:
Celebrate milestones such as successfully meeting payroll, securing extended payment terms, or maintaining operational excellence during this challenging period. Acknowledge and appreciate the team’s efforts in helping the company weather the storm.
Reflect and Plan for the Future:
Once cash flow stabilises, reflect on what strategies worked best. Use these lessons to improve cash flow forecasting, budgeting, and financial planning to prevent future instability, especially as the company continues to grow.