When it comes to the finances of the business, increasing your profits might be the most common concern that you have, but it shouldn’t be the only thing that you’re worried about. You also need to think about the cash flow problems of money in and out of the business, aka, the cash flow. Learning the best way to avoid cash flow problems is will help your small biz grow.
Even if you’re technically profitable, a slow cash flow can choke your business’s ability to invest in the resources and improvements it might need.
Here, we’re going to look at some of the most common cash flow problems, and what the best way to avoid cash flow problems is for your small biz.
You Don’t Actually Know What Your Cash Flow Is
You should have a good idea of not only what money you have in the bank, but also what you can expect to come out of it, and what you can expect to come into it. This is the basic understanding of your cash flow that you need to understand, but looking over past bank balances isn’t enough.
With the help of small business software like Fluidly, you can more effectively track your comings and goings, as well as what you have in terms of real cash at any given time.
You’re Waiting Too Long for Money to Come in
This is a very common, perhaps even universal, issue for those businesses that accept invoices. If you’re waiting weeks, even months, for invoices to come in, then you need to get comfortable with stirring your clients into action.
Setting deadlines on contracts and invoices, sending reminders, and tracking invoice payments can increase your profits by making sure that you’re getting more of the money that you’re owed, on time.
I personally like to call clients when they owe money. Sometimes if they are in a bind they may send 1/2 now and 1/2 later which is better than nothing. However, you may have to cut your services off if they go beyond 90 days late. (Been there, done that!)If you’re waiting weeks, even months, for invoices to come in, then you need to get comfortable with stirring your clients into action. #smallbusinessowners Click To Tweet
Cash Flow Problems Caused by Losing Track of Payments
When the shoe is on the other foot, however, it can be hard to excuse. A lot of business owners will lose track of or forget about the payments that they have to make, as well. You don’t want to deal with high late fees that can add up quickly!
As such, bills can come out when you least expect or want them, and you can go over deadlines on payments, costing you more in the long term.
To that end, accounts payable software such as OnPay Solutions may be able to help. By automating more of the process, as well as setting up reminders and notifications, you can always be aware of how much is coming out of the bank and when.
You Have Your Personal and Business Finances Tied Up
A very common problem for new and small businesses. You should make sure that you open a business account as soon as possible, and keep any money made by the business separate from your personal cash (outside of the salary that you pay yourself.)
It’s easy to get mixed up in which expenses are from the business and which are from you, so you can get a misunderstanding of your cash flow very easily, which can lead to you having more or less cash than you think coming in.
To Conclude About Your Cash Flow Problems
With the help of the tips above, you can make sure that your cash flow is current, smooth, and easy to check, so you always know what money you’re actually able to spend.
What type of cash flow problems has your small business faced? Have you been able to overcome them? I’d love to hear from you in the comments!