Cash flow problems can be serious if left unchecked. However, they’re also often very simple to resolve. If you are spending too much – or generating too little income – the balance of cash in your business will suffer. This straightforward equation means that most solutions to small business cash flow problems aren’t particularly difficult to work out – and there are some simple steps that you can take to improve them.
Step 1: make it easier for customers to do business with you
If someone wants to buy a product or service, can they simply place an order online? Or do they have to go through a written form and send a cheque…if cash flow is sluggish and you want to give it a boost then start by looking at the obstacles you place in the way of converting customers. Always look to make the payment process as easy and quick as possible to ensure a steady stream of cash into your business.
Cash flow problem solved: Lots of customers but payments slow to reach account
Step 2: revise your invoicing process
Do you have clear payment terms that include penalties for late payment and are you swift at invoicing after a sale? Make sure that your customers and clients are made aware of the terms on which the sale is being made and that you have processes in place to pursue any late payments. Technology can be a big help here; from sending out automated reminders, to establishing automatic monthly payment plans. Perhaps even invest in a CRM system to expedite the more menial tasks?
Cash flow problem solved: lots of orders but no income
Step 3: make friends with your local bank manager
The reality of life as a small business owner is that sometimes, financially, you have to cut it pretty fine. That’s why a lending facility that you can dip into to cover those shortfalls without any problems arising is essential. Whether you use an overdraft, loan or revolving credit facility make sure you have some sort of safety net for lean months.
Cash flow problem solved: no safety net
Step 4: cut back on your costs
Cash flow is essential for driving growth in every business and particularly for those just starting out. If you’re not able to free up enough cash to reinvest in the business then start looking at costs that could be cut and savings that could be made to do just that. Live within your means if cash is tight; that comfy new executive chair you like will still be around in a few months!
Cash flow problem solved: great income but no cash for growth
Step 5: cash flow forecasting
Of course, predicting the future is impossible. However, cash flow forecasting will at least give you some idea of what you can expect to happen to your books over the next six months to a year. This is an essential skill for any small business owner and worth using, whether you do this yourself or with the help of a professional.
Cash flow problem solved: you have no idea what might happen next