Cash Flow Solutions For Your Small Business
Finding your cash flow balance is critical to your business’s success. You will not benefit from any growth your business experiences if your costs are constantly rising to match it, just as you cannot afford the essential expenses if you can’t get the cash into your accounts quick enough. Here, we are going to look at a variety of cash flow issues that could be stopping your business from meeting its true potential and what you can potentially do about them.
Trim The Fat
When you are first starting a business, it can be easy to keep track of all the costs and overheads. However, as it grows or as you find your needs expanding, it becomes easy to lose track of them. It is then the time to start combing over your overheads once again and finding ways to start reducing them.
Could you get a better deal on utilities by switching provider? If it’s time to renew an insurance policy, is someone else offering a more competitive deal? Are you spending more on stationary than you should be? Managing your overheads and seeing where you might be overspending should become a regular practice in the business to ensure you stay on top of cost creep.
Besides overheads, you also have expenses to worry about. If you travel on a regular basis or you have a team that you send to business meetings, conferences, and trade shows, then you could be stressing out the company credit card a lot more than you need to. Instead of leaving things as they are, start using expense tracking apps and encouraging employees to do the same. Don’t forget to collect and file all the receipts that come from any of those excursions. You don’t want to cut expenses off entirely, of course, but if you spot certain habits that are costing you too much over time, it might be worth addressing it with your team or even just yourself!
Understanding Your Year
Most businesses have a peak season and an off-season. Some businesses are extremely seasonal, making the majority of their money for a few months. Besides expanding your revenue streams to diversify and encourage more stable revenue, it is essential that you understand the annual ups-and-downs of the business. Finding the right funding can help you get through the leaner months. If you don’t have the credit you need right now, using loans with no credit check can help you get through the first year or two. Of course, if you are borrowing, make sure that you understand exactly how much you have to pay back and what your finances are going to look like through the repayment period. If you can’t do that, you shouldn’t ever agree to borrow.
One of the problems of dealing with clients, as opposed to customers, is the reliance on invoicing. It is convenient for them, but it can cause a whole range of problems, especially when you find those who aren’t as expedient in providing payment. Invoice factoring is a kind of funding you can get where you borrow based on invoices you have sent on income that you are still waiting for and it can help ensure that you get the majority of the payment without having to wait for customers. However, it might be wiser to ensure they are paying their invoices on time. The best way to do that is to have a system of reminders, as well as including pay-by dates and late payment fees in your contracts. Sometimes, they simply need a little extra incentive to send you what you are owed.
You likely have your own invoices to pay, too, particularly to your suppliers and your business service providers. Most businesses rely on a network of such providers to keep running, but you could potentially be making some savings. The single most effective way to do that is to negotiate with them. For instance, most suppliers rely on long-term relationships with a few key clients. You could offer a long-term contract to them, essentially ensuring them of your loyalty in order to get a better deal.
When Debt Keeps Coming
If you are unable to effectively manage your loans, revolving lines of credit, and other accounts payable, then it can be too easy to find your business constantly having to deal with debt. Some level of debt is normal for a business but if it seems like you never get a break and that you rarely get to invest money back into the business, it might be worth looking at restructuring your debt. Through consolidation, for instance, you can have your short-term debt turned into long-term loans, and it might even help you reduce the interest rates on that debt. Long-term loans offer you a little more time to address other cash flow issues and can make payments more manageable for now, so you find some room to invest cash back into the business.
Stop Jumping The Gun
You might be all too eager to get the business up and running and to keep it in high supply, but if you start spending money you haven’t got on assets you are not able to use or inventory you are not able to sell, it can spell real trouble for your finances. The most common instance of this is when business owners fail to understand the demand for their products and buy more inventory than they have need of. Even if those products will sell eventually and factors like spoilage don’t apply, you will still be paying the costs of inventory, such as storage costs, while waiting for them. You have to become better at creating business forecasts and doing your research to understand what is in demand in your inventory.
Unless you start thoroughly recording and monitoring all your business costs, revenue, expenses, and accounts (both payable and receivable), it’s going to be much harder to identify cash flow issues than it should be. If you can’t keep track of it yourself, it might be time to rely on an accountant who can do it for you.
I hope you have post useful and given you some ideas on how to keep your cash flow balance in the black. If you have please give it a share on your favourite social media platform.
As ever if you have any questions or just want to share your thoughts please leave a comment below and I will get back to you as soon as I can.
With Grace and Gratitude