Surviving Low Cash Flow: A Real-Life Journey of an SME

Introduction

Small and medium-sized enterprises (SMEs) have our deepest empathies!

They often find themselves navigating through challenging waters.

One of the worst challenges an SME can face is the dreaded low cash flow period.

We kinda broke everything down with our client.. in this case we call them CreativeCrafts. No that’s not their real name of course but they are a company in selling stationery and craft in South East Asia.

Chapter 1: The Business on the Brink

Meet CreativeCrafts, a small family-owned craft store that has been a staple in their local community for over a decade. However, like many SMEs, CreativeCrafts was not immune to the financial fluctuations that can cripple a business. A sudden drop in sales, unexpected expenses, and slow-paying clients pushed the business to the edge of a financial precipice.

Yes you, the SME owner, are not unfortunately unique to these problems.

1.1 Recognizing the Problem

The first step towards surviving low cash flow is recognizing the problem. CreativeCrafts was quick to identify that their cash reserves were dwindling rapidly.

Let us stated categorically it is pretty amazing how clients we know have started on the edge of low cash flow yet stay in a state of denial.

Brutal honesty is pretty much key to survival.

1.2 Analyzing the Causes

To address the issue effectively, CreativeCrafts needed to understand the root causes of their cash flow woes. This involved a meticulous examination of their financial records, which revealed a few key factors contributing to their predicament:

a) Slow-Paying Customers

Many of CreativeCrafts' customers were taking longer than usual to settle their invoices, leading to a cash flow bottleneck.

b) Seasonal Sales Fluctuations

The business experienced periods of boom and bust due to the seasonal nature of their products. Christmas presents really good cash flow while months of April and May can go slow.

c) Unforeseen Expenses

Unexpected costs, such as equipment repairs and inventory losses, further strained their finances.

Chapter 2 : WHHYYYY???

Surviving low cash flow is a journey filled with valuable lessons. CreativeCrafts experienced their fair share of mistakes and setbacks along the way. Trust us… even our business as consultants are not immune and we have faced challenges and set backs so much that we feel absolute confidence when dispensing advice.

1. Over-Optimism

At times, CreativeCrafts was overly optimistic about future sales and revenue, leading to financial misjudgments. The key lesson here was to maintain a realistic outlook and make conservative financial projections. Don’t take loans if they are not necessary or start another shop if your profit is good enough for you but not enough for excess. You will know what we mean. 😉

2. Neglecting Cash Reserves

During periods of financial stability, CreativeCrafts sometimes neglected to build and maintain sufficient cash reserves. This left them vulnerable when unexpected expenses arose. The takeaway was the importance of always having a financial safety net.

Don’t splurge on a Mercedes or overseas trips! Reminder to self : always save money where possible and thrive in simplicity and delayed gratification.

3. Communication Is Key

CreativeCrafts learned that open and transparent communication with customers, suppliers, and employees was crucial during times of financial hardship. Keeping stakeholders informed helped build trust and loyalty. In our consulting business years ago when we had our financial challenges, we kept our books open to staff and told everyone to take a cut if they wanted to stay in the job.

That hard period taught us the value of being honest and how employees ACTUALLY appreciate that honesty, and will take ownership.

Human nature is pretty resilient and humans love working together (Provided management is sound!).

Surviving times of low cash flow is a formidable challenge that many SMEs face.

CreativeCrafts' real-life experience offers valuable insights into how to confront and overcome this predicament.

Perhaps in a nutshell for SMEs in particular. Always be prudent and save money where possible. We recognize that entrepreneurs work really hard and with some semblance of success will tend to reward themselves which is absolutely necessary. But not at the expense of the business.

About Us

Curt & Co. is a business consulting company focused on the South East Asian region.

We complement our clients through extensive market research and due diligence, providing thorough, feasible and financially efficient growth methods for our clients in the region.

We provide 3 main pillars of services including

· Overseas Business Expansion Consulting

· Marketing

· Business Operations Outsource

Clients have the advantage in ​accessing our network in our help whether to meet partners, set terms for franchisees or licensees or negotiate with direct clients in closing a deal.

Our offices are located in Singapore, Indonesia, Vietnam and Philippines.

Find out more on us : www.Curtconsult.com

Contact Us : marcus@curtconsult.com