How long have you been in business? If you’re like many business owners, you’ve been around long enough to experience cash flow problems. This type of problem can happen even when your business is profitable. Regardless, solving cash flow problems can sometimes seem impossible.
Solving Cash Flow Problems
A growing accounts receivables and purchasing for inventory only begin to explain the cash flow problems that afflict many small businesses. Payroll and other mandatory expenses only contribute to the challenge.
Do you understand the danger that cash flow issues pose to your business? More than 80 percent of all small businesses fail because they have trouble maintaining access to a sufficient amount of cash.
Solid bookkeeping and accounting practices can form the foundation of successful cash flow management. So, if you’re failing in those areas, now is the time to contact ABS Accounting.
If you’re not ready to connect with us now, you can improve your business’ condition by using the following 7 tips for solving your cash flow problems.
Forecast
Knowing the importance of cash flow to your success, you shouldn’t take chances as possible. One way to minimize your risk is to project your cash requirements for the short and long run.
In addition to predicting how much cash on hand you’ll need at any time, your forecast can help you prepare for growth-related issues.
For example, if your business grows too quickly, you’ll need to hire more employees. However, your overall transaction costs may simultaneously increase, leaving you unable to make payroll or pay vendors.
Unexpected events such as equipment failure, a cyber attack, or a product recall can also threaten your business’ survival.
So, rather than crossing your fingers and hoping for the best, be proactive. Create and maintain an ongoing 12-month cash forecast. Use software to update your data in real time and frequently review your forecast.
When you have advance warning of a cash crunch, you’ll have a better opportunity to solve your cash flow problems before they become fatal.
Motivate
As a rule, customers want to wait until the last minute to pay invoices. So, to improve your cash flow, consider offering incentives for early payments. For instance, you could offer a 2-percent discount to customers who pay within two weeks. Such an opportunity can reward your customers for paying early and give you access to the cash you need when you need it.
Negotiate
If you’re paying for your inventory in cash, find out if your vendors will give you credit. If you can’t negotiate favorable terms, you can look for new vendors who might accommodate your needs.
Sure, you may have to pay slightly more to stock your shelves or supply your production line. However, the benefits of improving your cash flow can more than justify the added expense.
Similarly, if you have business loans, try to negotiate with your creditors to grant you additional time to pay.
Ask
Sometimes your business’ practices contribute to its cash flow problems. For example, if you don’t promptly send invoices to your customers, how can you expect them to pay?
In addition to actually sending invoices to your customers, try building better relationships with them. When they feel better about you and your business, they may feel more comfortable communicating with you.
Consequently, your customers will want to maintain their accounts in good standing and let you know if they’re having difficulty paying.
Make sure that invoices always include essential information such as payment terms, due dates, and acceptable payment methods. Itemizing all the goods and services can eliminate confusion and reduce payment delays.
Cut Costs
When you’re mindful of your business’ cash flow problems, you’ll have a chance to reduce, defer, or eliminate your current expenses.
Always perform a thorough cost-benefit analysis before your business spends money. If you can’t justify the expense, avoid it.
Similarly, if you’re inclined to furnish luxuries to your staff such as free meals or coffee, you know what to do.
If your business has persistent cash flow issues, you may need to further reduce overhead. Try shopping for a facility with lower rent and looking for ways to minimize your business’ utility bills.
Theoretically, when you cut costs, you’ll have more cash.
Review Pricing
Sometimes, cash flow problems arise from a failing price strategy. So, periodically review your prices to ensure that your business can cover its costs.
In addition to comparing your price with the cost of goods sold, account for your business’ selling, general, and administrative costs. Additionally, compare your prices to your competitors’.
Sometimes, you can raise your prices and stay competitive. In such cases, you can improve your cash flow. However, if you can’t raise prices high enough to earn a profit, you’re losing money every time you close a sale.
So, if you can’t set your prices high enough to both stay competitive and earn a profit, you’ll need to revise your product line and reevaluate your business plan.
Get Help
If you’re serious about your business, you must get serious about cash flow. When you don’t get the results you need while solving your cash flow problems, you should get help.
Your ABS Accounting team can assess your business financial condition and help you create a successful cash flow strategy.
At first, you might not think that you can afford outsourced accounting services. However, you can’t afford to pass up this opportunity.
By trusting the professionals at ABS Accounting, you’ll have peace of mind. You’ll also have more time to concentrate on your customers and core competencies.
Solve Your Cash Flow Problems
Resist the temptation to ignore your business’ cash flow problems. By acting now, you can minimize the current risk to your company and prepare yourself to meet future challenges.
Contact ABS Marketing today to learn more.
You can also learn more about how to manage cash flow at Inc.com.
About ABS Accounting, LLC
ABS Accounting Liberty SC serves small businesses and start-ups across Upstate South Carolina. Our local service area includes many nearby cities:
- Easley SC.
- Pickens SC.
- Six Mile SC.
- Central SC.
Additionally, we support clients in nearby counties:
- Anderson SC.
- Greenville SC.
ABS Accounting, LLC provides remote accounting services for e-commerce businesses, retail chains, and international companies.
Learn more about ABS Accounting on our “about us” page.
