A significant part of the challenge of running a strong business is maintaining smooth cash flow. After all, you're faced with numerous expenses on a regular basis - rent, wages, raw materials to keep making your product - and you can't cover them unless you continually collect debts from customers and keep that cash moving.
What are some examples of self-inflicted cash flow trouble, and how can you address such problems?
Unfortunately, sometimes issues come up in the process of moving money. Sometimes, those issues are your customers' fault - they might forget to pay a debt they owe, or deliberately put it off because they're having cash flow trouble of their own. In other situations, though, the problem is something you're accountable for.
What are some examples of self-inflicted cash flow trouble, and how can you improve your internal strategies to address such problems? These are questions worth exploring.
A few common cash flow issues
When your company's cash flow starts to stagnate, it's only natural to look at external factors such as struggles on your customers' part. "Why can't they pay what they owe faster?" you wonder.
In some cases, though, identifying the problem requires looking in the mirror. According to the Victoria State Government, there are a few common examples of this:
- Inadequate record-keeping: Sometimes, it's difficult for your company to collect debts because you don't have precise records on who owes how much, and when. Simply recording all the details accurately can go a long way.
- A lack of foresight: The best companies know how to fight off cash flow issues by anticipating them before they even happen. If you have a cash flow forecast on hand, you can use it to foresee problems and address them quickly.
- Too much debt: The problem might be that you're too dependent on cash flow because you owe too much money yourself. If your business has overextended itself financially, that's not the customers' fault. That's on you.
What you can do to improve matters
If you'd like to address cash flow issues by managing operations better internally, that's a laudable goal. There are a few things you can do on that front, fortunately.
One is to get a better handle on the above challenges - record-keeping, forecasting and so on. If you have a better handle on your company's finances and all the specific details of cash flow, everything will be easier. You can also change the amount of cash flowing out your business so there won't be as much pressure to collect debts.
The other option for shoring up cash flow problems is to change how fast the money flows. Consider tightening up your payment terms and turning unpaid invoices into paid ones faster. If you impose time limits on your customers and perhaps even use late fees as an added incentive, it will certainly have an impact.
Getting a little outside financial help
Sometimes, you try all of the above strategies and nothing really works. From changing your bookkeeping practices to imposing stricter collection rules on your customers, it just seems like no strategy will guarantee the smoother cash flow your business is hoping for. If that happens, it's time to find another plan, and the best idea in that regard may well be invoice finance.
With invoice finance, you can quickly get your hands on the cash you need to keep your business operational. You don't have to worry about payment terms - the money you're looking for will be in your accounts within hours, meaning you can get to work immediately on improving your business. In the end, that's what it's really all about.
If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].