Small businesses are the backbone of the American economy. According to The SBA, small businesses account for 99.7% of all businesses in the United States, and they employ more than half of all private sector employees. Despite their importance, small businesses often have a difficult time accessing the capital they need to grow and expand. This can lead to cash flow problems that can cripple a business. In this blog post, we will discuss 14 ways small businesses can solve their cash flow problems!
Use a Monthly Business Budget:
One way to stay on top of your cash flow is to use a monthly business budget. This will help you track your income and expenses, so you can see where your money is going. You can find templates for small business budgets online or in accounting software like QuickBooks. Starting with an annual budget and an accurate cash flow statement can help you break down the monthly budget. When you have a high-revenue month, you can save money to account for lower-revenue months.
For a free trial of our software that will help you stay on top of your cash flow as well as create your monthly budget, visit here.
Short-term loans:
Another way to solve cash flow problems is to take out a short-term loan. These loans are typically for small amounts and have a relatively short repayment period. You can use the money from a short-term loan to cover unexpected expenses or fill in the gaps when your revenue is low. There are many online lenders that offer short-term loans, so you should be able to find one that fits your needs. Just be sure to read the terms and conditions carefully before you apply. you will also need to make sure that you have all of your documentation together and your numbers ready.
If you need help putting together all of your documentation, you can refer back to the previous section with the link for a free trial of our software.
Small business lines of credit:
If you have good credit, you may be able to qualify for a small business line of credit. This can give you access to funds that you can use as needed, making it a flexible option for solving cash flow problems. The interest rate on a business line of credit is usually lower than the rate on a credit card, so it can be a more affordable option. Just be sure to only borrow what you need and make your payments on time to avoid getting into debt.
Credit cards:
Using a credit card can be a quick and easy way to get the funds you need to solve cash flow problems. However, it is important to use caution when using credit cards. The interest rates on credit cards are usually high, so you will want to make sure that you can afford the payments before you charge anything. You should also try to pay off your balance as quickly as possible to avoid paying interest. If you know that your invoices will be paid on a net 30, net 60, or a net 90 then you should plan accordingly with how you utilize your available balance. Make it your mission to keep your balance as close to zero at the end of each month as you get close to the reporting date.
Renegotiated terms and contracts:
If you have existing contracts or agreements, you may be able to renegotiate the terms to improve your cash flow. For example, you could ask for a longer payment period or a higher percentage upfront. This can be helpful if you know that you will have a large expense coming up that you need to pay. Just be sure to get everything in writing so there are no misunderstandings.
Faster invoice payments:
One way to improve your cash flow is to get paid faster. You can do this by invoicing your customers as soon as the work is done or setting up automatic payments. You can also offer a discount for early payment to incentivize your customers to pay sooner. Just be sure that you are clear about your payment terms so there is no confusion.
Improved invoicing processes:
If you are not already using an invoicing system, now is the time to implement one. Having a system in place will help you get paid faster and keep track of your invoices. There are many software options available, so you should be able to find one that fits your needs. Just be sure to do your research and read reviews before you make a purchase.
Here is a list of invoicing systems from Forbes.com.
Manage office expenses:
Another way to improve cash flow is to manage your office expenses. This includes things like rent, utilities, and supplies. If you are spending more than you need to, it will impact your bottom line. Try to negotiate better terms with your vendors or shop around for cheaper options. You may also want to consider subleasing part of your office space if you have extra room. Take note of every expense you currently have and review where there is spending going out that can be worked on. You may be able to find a lower rate on paper products or the internet if you take the time to look.
Monitoring and controlling growth:
If you are not careful, rapid growth can lead to cash flow problems. This is because you may need to invest in new equipment or hire additional staff before you see a return on investment. To avoid this, try to monitor your growth and make sure that it is sustainable. You may also want to put limits in place so that you do not grow too quickly. It can sound counterproductive to slow growth but this is one of the ways a business runs into cash flow problems that are not typically considered.
Negotiate Payables:
Oftentimes, businesses will find themselves in a bind when it comes to paying their bills on time. If this is something that you are struggling with, see if you can negotiate a longer payment period with your vendors. This will give you some breathing room and help to improve your cash flow. Most businesses fail to ask for negotiation of payment terms with their vendors. However, vendors want to keep you on as a client just as much as you want to keep your clients.
Check out this article for more information on the topic.
Accept online payments:
In today's world, more and more people are paying for things online. If you are not already set up to accept online payments, now is the time to do it. There are many different options available, so you should be able to find one that fits your needs. Just be sure to do your research and read reviews before you make a purchase.
Small Business Lines of Credit:
If you have good credit, you may be able to get a small business line of credit. This can be helpful if you need some extra cash flow or if you have unexpected expenses. Just be sure to only borrow what you need and make your payments on time so you can avoid interest charges. Read the fine print and make sure that you fully understand the fee structure. You should also consider a cash discount processor that allows you to pass the fee to the consumer.
Upsell and Cross-sell:
If you have existing customers, upselling and cross-selling can be a great way to generate additional revenue. This is because they are already familiar with your products or services and are more likely to make a purchase. Just be sure to offer them something that is valuable and relevant to their needs.
Raise Prices:
When is the last time you raised your prices? Raising prices can be a quick way to increase revenue. However, you need to be careful with this approach as it could impact your ability to attract new customers. If you do decide to raise prices, make sure that you communicate the change to your customers in advance. You should also consider offering discounts or promotions to offset the price increase. Part of this process is understanding where your costs have gone up. For more information on the topic, check this article out.
By following these eleven ways, small businesses will see an improvement in their cash flow problem. Cash flow problems can often be a death sentence for small businesses. However, by taking proactive measures and utilizing some of the financial tools at their disposal, small businesses can overcome these challenges. We hope this blog post has provided you with some helpful information on how to solve your cash flow problems! If you would like to meet with us and learn more about how our software can help your business, book a meeting here. Do you have any other tips for solving cash flow problems? Share them in the comments below! Thanks for reading! #solvecashflowproblems #smallbusinesses #thebackboneofAmerica #overcomethechallenges #deathsentence #financialtools
