Cash flow is the number one reason businesses fail. If you’re in this tough position you’re not alone and we’re here to help you get back on top. We’ll outline likely causes of cash flow problems as well as tips to help you deal with them.
What went wrong?
Asking this simple question to better understand the problem is critical to determining what actions need to be taken.
So, what led to your cash flow problem?
Here are three possible causes of your cash flow problem:
There are three common causes for sales issues. If any of the following resonate with you, it’s time to make a change. Consider asking yourself these questions:
- Is it possible my price is too high?
- Does it seem that the market isn’t excited about my offering?
- Does it appear that my marketing is not resonating with the right audience?
Your answers could point to an action plan to get your sales back on track.
If your sales are looking good, the next step is to look at your expense sheet. If your revenue is strong but cash flow is low, there are likely issues arising after sales are made. Don’t wait until you’re struggling, periodically review your expenses to stay afloat.
If you’re still struggling with cash flow issues but your sales and expenses are looking good, it’s time to dig a little deeper into account receivables. Unpaid invoices are not a normal cost for doing business. In fact, not collecting on a sale puts you in a worse position than if you never made the sale.
Tips To Fix Your Cash Flow
Reduce Your Expenses
In every business there will be expenses that chip away at revenue, from unnecessary service upgrades to ongoing subscriptions. Don’t let expenses impact your business, reduce them to balance your budget and get on top of your cash flow.
Effectively managing your inventory can help alleviate some of your pains. Excess inventory can dry up your cash flow and leave you stuck trying to move it. You may want to discount extra inventory to move it, or consider doing what many small businesses are by using just-in-time replenishment to protect yourself against excessive inventory.
Utilise Accounting Software
If you’re still accounting manually it’s time to get with the times by using inexpensive accounting software and outsourcing options. These will outline cash flow problems before they happen by meticulously tracking your cash flow and providing cash flow projections. Avoid the stress and hassle of manually accounting and use the resources available to you.
Have a back up
Unanticipated cash shortages happen. From bad debts to being paid late, it can be easy to slip into trouble. Plan ahead and have a back up plan, either access to a loan or line of credit, or a cash reserve. By building a cash reserve for hard times, you’ll have support for your business if things go south. Occasionally you may need to borrow money, which isn’t a bad thing. While it’s not there to rely on to solve ongoing cash problems, it can be a great safety blanket if troubles arise.
While temporary cash flow problems are part of doing business, if you’re finding that these problems are ongoing, it’s time to proactively address the problem to get a positive cash flow again.
If you’re having cash flow troubles or want to safeguard against them, we can help. Get in touch with us today!