Few things in life offer more fulfillment than running or owning a business. You get the opportunity to build something new from the ground up.
However, that doesn’t come without its share of obstacles. No matter what your background may be, there are bound to be areas of business you could improve upon.
One such a struggle for most companies is managing cash flow, a necessary evil to all successful companies. Fortunately, there are resolutions for any possible issue that you may be having in that arena.
Here are several cash management problems and solutions you can take towards them.
1. Too High of Overhead
One of the biggest worries any business owner has is the neverending task of staying on-pace with the demand for your product.
Out of fear, owners will invest too heavily in things such as too high rent, too many laptops/desktops, and other utilities you may find in a common workplace.
If you’re not careful, your overhead costs will get uncomfortably close to the revenue you’re bringing in. You’re losing out on greater returns because you don’t fact check the cost of your overhead.
You might find that your necessary overhead is too close to the revenue you’re bringing in as you begin your startup. If so, applying for a funding solution for your business would be a tremendous opportunity for you.
2. Lackadaisical Bookkeeping
As a business, you go to extreme lengths to ensure you’re giving the best product or service possible to your customer.
However, imagine never realizing that you were never actually paid for that service years down the line.
Such a scenario is entirely possible for those businesses out there that don’t prioritize bookkeeping and proper invoicing.
There are far too many exceptional accounting software options out there for you to not be taking advantage of. Find the right fit for your business and keep a watchful eye out to make sure you’re bookkeeping is up to par.
3. Dragged-Out Payments
Another way your business may be suffering from its invoices is by the payment length terms you’re offering your clientele.
Your small business won’t be able to thrive on 60-day and 90-day payments. You’ll need your payment on services far sooner than that.
One of the best ways to improve this is by incentivizing your clients to pay out much sooner than that. Give them a small discount for paying within a smaller time window (such as 8-10 days).
4. Missing Payment Amounts by Customers
As you’re undoubtedly realizing by reading the last three paragraphs, your own clients can inflict massive damage on your cash flow if they aren’t put in check.
It’s always important to have proper bookkeeping practices with a credit control system to recover unpaid amounts.
You did your end of the bargain: you delivered on the product/service you promised your client. Now they have to deliver on what they promised.
Even still, there may be some situations where a client goes out of business/bankrupt, and you may never see that payment. In those situations, a business loan can be a valuable way to compensate for the losses you weren’t expecting.
5. Inventory Is Too High
Another monumental loss for your cash flow can come in the form of excess inventory in your warehouse: a product that was never sold.
That leaves your business on the hook for buying or manufacturing more materials than what customer demand called for.
The best solution for this inventory problem isn’t in inventory at all; it’s in your warehousing methods. Place a priority on watching things like demand trends and projected sales, then higher or lower manufacturing accordingly.
6. Imbalance in Outgoing and Incoming Credit Terms
Running an efficient business means having structured credit terms for both the clients that are paying you, as well as the suppliers you’re paying.
Both are essential to keeping your cash flow as balanced as possible. For example, if you give clients a 40-day window to pay you, but your suppliers have given you only 20 days then you’re cash flow will become imbalanced rather quickly.
Feel out what your business calls for. You may be in an industry where one credit term simply can’t be negotiated.
For instance, if your supplier window is non-negotiable, you’ll need to lower the payment window for your clients to regulate cash flow.
7. Too Low of Price Points
The lead problem of your cash flow issues may be that your products or services are too low.
Take a hard look at all the expenses that go into bringing your product to fruition. Are you charging more than what it costs to make your product? If not, you’re losing money. Fast.
There is a bevy of routes you can take on this: highering prices on products, dropping products, or adjusting prices based on the costs of each individual service.
8. Not Enough Profit Coming In
Possibly the most common issue among most startups is the lack of profit to start out. It seems like company expenses don’t understand this aspect.
It takes time to build up a brand and a consistent book of business. However, those costs will keep coming in all the same.
Apply for a funding solution for your business to handle those costs while your company gets its footing.
Consider These Cash Management Problems and Solutions in Your Business Model
Do one or more of these cash management problems and issues sound like they pertain to your business currently? If so, you have options out there to get your cash flow back on track.
Be sure to read this article on the top 5 cash flow problems for small businesses. It will give you more information on what to look out for in your day to day.
For more inquiries, please start by applying for funding and we’ll be happy to assist you further!
Checking for pre-approval will not affect your credit score.