5 Ways To Avoid Business Cash Flow Problems

5 Ways To Avoid Business Cash Flow Problems

Having good cash flow keeps a business alive while poor cash flow can shut a business’s doors almost before they open. In fact, the number one reason most businesses do not make it past their first year is due to cash flow problems, as well as why more than half of businesses do not survive past their fifth. In order to keep your business healthy and successful, here are five ways to avoid cash flow problems:

  1. Overpaying on Business Expenses

Often time’s businesses are overpaying for business expenses without even realizing it. From office supply fees to Internet to services, there are potentially multiple areas that are drying up your cash flow. Instead, look to rent office supplies. They are often far more inexpensive and typically come with a warranty. Check out inexpensive wireless companies like frontier fios, and consider outsourcing for services like payroll and accounting instead of paying in-house employees to do it.

  1. Disorganized Books

One of the most important aspects of a successful business is bookkeeping. This is often neglected, as small businesses are usually pre-occupied with other aspects of the business. However, if the books are not organized or consistently updated, there will be money troubles ahead. Without a proper invoice system or record of customer payments, you could easily be losing thousands of dollars each month. Once your books are organized, you can determine how much each customer owes you, how much you owe employees, and who you have already paid.

  1. Bad Debts

Bad debts are owed amounts from customers that cannot be recovered, which can be devastating to a small company. One of the first things you need to do when opening up a business is to set up a credit control system. If your books keep a record of your clients’ credits or tabs, then setting up a credit control system will be simple. Make sure to send out emails reminding customers to pay their debts, and if they refuse, you can have a debt recovery firm take care of the issue for you, which assures you that your company will not lose any money.

  1. Profit Problems

A lack of profit will eventually lead to cash flow problems. While this is of no surprise, many businesses do not quite realize just how slim their profit margins are. As soon as you start noticing that profits are decreasing, address the problem as soon as possible. Determine what is causing your business to lose cash. Find solutions such as increasing prices, increasing sales, or cutting back on unnecessary expenditures.

  1. Growing Rapidly

While growing your business is often the ultimate goal, growing the business too quickly can actually sink your business because you have stretched your funds too thinly. Before expanding your business, make sure you have the proper resources to do it in order to maintain a stable, sustainable business.

Many businesses face one if not more of these cash flow problems. However, staying on top of these issues can help your business survive and remain successful.