Even if your business is doing an outstanding job at developing a product and making sales, that's still not a guarantee of strong financial health. The other element to consider is cash flow, and that's an area where many otherwise well-run companies have a tendency to fall short.
Let's take a look at some of the common problems that arise for companies with poor cash flow.
This might apply to you. You might be making lots of sales, but are you following up on that by collecting payments from the customers who owe them? If not, you risk damaging your company both short-term and long. It's much harder to drive real business improvement if you don't have the cash on hand to pay for it.
Let's take a look at some of the common problems that arise for companies with poor cash flow, then examine the strategies you can use to avoid them.
What happens when your cash flow suffers?
When cash flow problems start to crop up at your business, it's absolutely a situation that merits taking seriously. As the South Australia Department of State Development correctly noted, cash is king, and there are a number of negative side effects that can result from not having it.
One is the potential for damage to company morale. When your cash flow isn't healthy, you have to live in a state of constant panic that you won't be able to handle basic costs like rent, wages and raw materials for production. This mindset will be visible to the entire staff, and it may well create a culture of unrest and a lack of confidence in the business. This will only make things worse.
Furthermore, when you don't have cash on hand, it's tough to make key tactical decisions that could potentially help your business improve. For example, you might have an opportunity to buy a large quantity of supplies at a discount price, or hire a new employee who could take your company to the next level. Ordinarily these would be golden opportunities, but if you can't afford them, they're a waste.
Taking steps to actively improve debt collection
There's no sense in panicking about poor company cash flow. Instead, you should devote your energy to tangible, constructive actions you can take to improve the situation. According to Small Business Trends, one of the best things you can do to improve cash flow is speed up debt collection by communicating better with your customers.
A quick email might be enough to reengage a customer and get some cash flowing.
"Believe it or not, 75 percent or so of your customers don't stop doing business with you because they are unhappy with your product or service," said Charles Gaudet of Predictable Profits. "Rather, they stop because you have inadvertently ignored them."
For this reason, Gaudet recommends taking steps to reengage customers and get them focused on purchasing and paying again. A simple gesture like an email or phone call can get you back on their radar, and with any luck, the payments will soon follow.
Of course, if they don't, and you're still looking at a stack of unpaid invoices, you might have to explore other strategies.
When all else fails, debtor finance is an option
When you try to improve your company's cash flow but nothing seems to work, you should know that debtor finance is always there as a backup plan. With debtor finance, you have immediate access to cash that can help you out of a rough cycle with invoicing your customers.
Companies of all types can benefit from debtor finance. Whether you're just looking to make ends meet this month, or you have ambitious goals for the long-term growth of your organisation, getting a little funding help can be beneficial. Talk to us today about the benefits we can offer your business.
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].