How can you address cash flow problems at your business?

March 8th, 2017

 

From time to time, almost every business encounters difficulties with managing cash flow. You're making more than enough sales to keep your company in operation, but it's still not sufficient - perhaps customers are lagging behind with their payments, or for some other reason, the money's just not moving.

If you don't have cash in your accounts, it's impossible to invest in the future of your business.

When this situation comes up, it's essential to respond quickly. After all, if you don't have cash in your accounts, it's impossible to invest in the future of your business. You might even struggle to make basic payments such as your employees' wages or the rent on your facility.

If you're in this predicament yourself, it's time to diagnose the problem and address it quickly. Are your customers to blame, or do you have other issues?

What's the problem with your cash?

Are you having trouble getting the funds to flow smoothly around your office? You might think you know precisely the cause for this problem, but it's not always as clear as you think. According to the Victoria State Government, there are a few different potential problems that might be to blame:

  • Not getting paid on time: This is the most obvious one. If customers are agreeing to sales but then not paying for them on time, it could seriously impede your business. Securing timely payment is key.
  • Paying your own debts too early: Having good relationships with suppliers is crucial, but there is such a thing as paying them too early. If you're spending money that you need right away for investing elsewhere in your business, it might be a mistake.
  • Too much stock (or work): If your business has a large inventory, it might be that you've got too much of your product and you can't sell it all fast enough. This is a liquidity issue. Likewise, in a service industry, too much labour and not enough payment can present issues.

Adjusting your strategy on the fly

Are you looking to accelerate your company's cash flow and get working capital in hand right away? If so, there are a few worthwhile strategies to consider.

Look for ways to improve payment processing for your business.
Look for ways to improve payment processing for your business.

One is speeding up the payment process. Rather than giving your customers 30 days to pay what they owe, you could shorten than to 15 or even ask them to pay up front. You can also shore up payment processing issues by allowing forms of payment that work quickly and seamlessly, such as credit cards.

If none of that works, it might be time to make serious adjustments to your company's business model. For example, if you're not making enough revenue from your current sales, you may have to raise your prices to earn more in the future.

We can provide the cash you need

The other way to get the cash you need to keep your business going is to opt for invoice finance. With invoice finance, you get cash upfront that you can use to cancel out your unpaid invoices and get back to business. This way, no customer payment issue or inventory overstock will keep your company from collecting and spending the money it needs.

When major cash flow issues arise, it can take weeks or even months to get your company back on its feet. That's never a problem with invoice finance. Instead, you can get over 80 per cent of the money you need within 24 hours. This means you can get to work tomorrow on improving your company, no matter what external factors try to bring you down.

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