Got cash flow problems? You’re not alone, but you should be concerned. Research shows it’s the reason that 82% of small businesses fail.
That said, it doesn’t mean that you’re doomed. It just means that you need to make some changes- fast. Let’s get to it.
1. Organize And Categorize Your Spending
To determine cash flow problems, you need a birds-eye view of where your money is coming and going.
This means that you should be categorizing all expenses- no matter how small. This will help you obtain the percentages and averages for each category. That information will help you assess where you need to make improvements.
2. Improve Your Invoicing Process
Don’t have an invoicing system? You’re setting yourself up for problems financially and emotionally (because you’re probably chasing down clients!).
Opt to automate your invoicing to reduce errors and get invoices to your clients faster. If you can’t completely automate, use a system from Quickbooks or Paypal to send invoices directly.
Finally, don’t forget to follow up on your invoices promptly.
If you’re chasing down clients constantly, you may be inadvertently be sending the message that you don’t value getting paid. Be clear and concise- that money is yours!
3. Lock Down Your Paystubs
Are you obsessing, editing, and spending far too much time on paystubs for your employees? If so, you’re wasting emotional energy- and you’re increasing the risk for cash problems.
Consider using a paystub generator to calculate payments automatically. That way you can organize all wages, whether you’re dealing with employees, contractors, or salary vs. hourly wages.
4. Incentivize Early Payment
Many clients would be eager to pay quickly if they receive a discount from doing so. Consider allowing clients to choose their payment day. Giving them a choice may increase their willingness to pay promptly.
Consider offering a slight discount for early or cash payments. Even if it’s 5%, this could make a huge difference in attracting new clients- and securing payment from existing clients.
5. Trim Your Expenses
If you’re really struggling with ongoing cash problems, you need to take a microscope to your spending. Many businesses wrongly assume they need to spend lots and lots of money to acquire money. However, these expenses aren’t created equal.
You need to assess each expense thoroughly. Is there anywhere you can cut out? Can you opt for a cheaper option? Can you inquire if the vendor is willing to offer any sort of discount?
Are you just starting your business? Consider the industry and do your research. While some companies require thousands of dollars in capital to start, some have very little to no startup costs at all!
Final Thoughts On Improving Cash Flow Problems
As mentioned, cash flow problems are one of the biggest risk factors for a small business. If ignored, they can be the detriment to the company you have worked so hard to create! That said, the right strategies and brainstorming can help keep the problems at bay.
Are you interested in learning more about reducing business risks? Check out this article today!