9 Ways To Stop Cash Flow Problems
One of the main reasons a lot of businesses go out of business isn’t because they’re not making money. It’s because they didn’t keep track of their finances and cash flow.
They spent indiscriminately without regard to the money coming in and going out of their business and end up having trouble paying debt – often their taxes. This causes them to have to go out of business and even get fined.
Many smaller offline and online businesses face cash flow problems at some time or another. They will often say that it’s either raining money or it’s a drought. When a new business starts, it’s hard to know when and how the money will flow, and if it’ll slow down during certain times of the year or remain steady. No matter what type of business you have, though, you can fix your cash flow problems with a little bit of thought and planning.
Identifying Cash Flow Problems
Cash flow is simply the amount of money going in and out of your business during a period. So, for example, if you have more cash coming in this month than going out, you have a positive cash flow for this month. Knowing this can help you avoid problems paying your fixed expenses.
For example, let’s say you know that in November and December your cash flow is very slow due to your industry. But in August you have a bigger cash flow. You can ensure that you save some of that money from the positive cash flow months to make up for the lower cash flow months.
Free Invoice Template Generator
Causes of Cash Flow Problems and Solutions
Break It Down
When you have enough data to look at your cash flow, break it down by month, week and day. Set a goal of how much you want to earn each day instead of a month. That way you can focus on doing enough actions to ensure you earn that amount each day. If you earn more on Thursday, don’t add it to Friday’s goal for example.
Learn to Budget
Budgeting is an important skill to learn for a household but also for business. When you have a firm budget, you’ll learn not to say yes to anything last minute, and all your purchases will become planned and thought out. Part of this budget should also include paying yourself. Some business owners only pay themselves at the end of the year for the entire year, while others pay themselves a certain salary every week or month.
Start a Continuity Program
If you really want to be able to project your income, it’s imperative that you have regular income coming in. A great way to do that is to start some form of program where people must pay for it each month. That way, you can project at least next month’s income.
Use Financial Software
It’s a good idea to have software that shows you a breakdown of where your income is coming from and where your expenses are going, as well as helps you project your income. You can use a spreadsheet but today there are a lot of cloud-based programs, from QuickBooks to GoDaddy Bookkeeping, that can help you with the numbers.
Pay Monthly Fees Yearly
At first, this may be hard to do. But start making it a habit at the end of the year in December or on the first of January to audit everything you pay monthly. If you really need it, pay for it for the entire year. You’ll save money and it will help your monthly budget as well.
Don’t Buy Last Minute
When you have a budget this shouldn’t be an issue. Sure, you may want to put aside some savings just for buying at sales that you didn’t know were going to happen, but only for things you have thought about previously. But otherwise, don’t buy things at the last minute without giving it thought.
If you don’t use it, don’t buy it. Use outsourced freelancers that can expand and contract, and software in the cloud that can also grow and shrink compared to what you need right now.
Use Credit Strategically
One way to even out your budget every month is to use credit strategically to pay for business expenses and equipment. However, only do this if you’re going to pay it off before you are charged any interest.
Don’t Forget to Send Invoices
It might sound obvious, but one of the most basic ways of fixing cash flow problems is getting paid on time for your products and services. If you have a service-based business or one that requires that you send invoices, it’s imperative that you stay on top of those invoices. Send them when you should, check that you’re getting paid on time, and don’t forget about them.
Free Invoice Template Generator
Having a well-designed, professional invoice can make a big difference in the eye’s of your customer, help you get paid on time. Before making any type of payment, customers want to ensure that they are doing business with a credible, trustworthy company. This means your invoices should be error-free with consistent branding and a clear, itemized list of goods or services. If you need help organizing all of the must-have information that comes on an invoice, download these free invoice templates.