Avoiding the Cash Flow Crisis that Negatively Impacts Your Business

Business owners - beware some of the hidden surprises that absolutely hinder your business cash flow! Nine out of ten small businesses fail due to continued compromised cash flow. This is not rocket science but a fact, according to Dun & Bradstreet. Poor cash flow management is the leading cause of businesses closing their doors.

Inflows of cash need to be a priority in setting the tempo for the outflows of cash. It’s great to be able to discount your invoices, but only if you have plenty of cash on hand for the discount to make sense.

What do I mean?  Well, if you’re saving 1% on a $1,000.00 invoice that needs to be paid in ten days - it’s not worth it! You can use that capital for an extra 20- 35 days, depending on how you pay your creditors, for a multitude of operational purposes. CASH IS KING, and when your expenses exceed your cash flow, your business will undoubtedly suffer from the stress of it.

Many business owners think that profit is cash flow, but it’s not! It adds to the cash flow paradigm. Your balance sheet and your Profit & Loss may look great, but if you’re behind on your invoicing and your clients haven’t paid you, it will truly result in a cash flow crisis sooner rather than later.

Almost always, revenue isn’t realized until it hits your bank account, and by that time almost all monthly expenses have been paid, leaving you with either a small profit or maybe no profit at all for the month.

How can you mitigate these circumstances?

Forecasting can be a useful tool in obtaining a pulse on your business cash flow. Review your weekly sales and invoices to see what is expected to arrive in receivable collections that week. In many instances larger customers obtain better pricing based on their volume. Remember, price is important, but service and dependability are more important, especially if you’re servicing a niche market. Do not diminish your margin or you’ll be out of business before you know it!

There are many areas that can certainly influence a cash flow meltdown. Here are a few:

  • An inability to fund payroll properly some months can be a nightmare for business owners as they also must pay the tax liability along with funding the payroll. Once owners get behind on payroll taxes, it’s an unending battle to catch up.

  • Business expenses like insurances can also be very costly, but solid coverage for business owners is a necessity in today’s market. Be ready for growth but recognize that with growth there is always an expense.

  • Seasonality may also play a role in the economics of your business, leaving you with little inventory and not enough cash flow to purchase the goods you need at the proper time and price point to service your clients.

How Can We Assist?

Capital Biz Solutions can solve many of these compounded cash flow issues by finding the proper source of working capital for your business at the time you need it! We have multiple sources which are very effective in helping you achieve the right balance of cash flow in your business operation. So, if you’re searching for financing options, search no longer!  We let you focus on your business while we do all the heavy lifting for you. We invite you to try our services.

Please feel free to contact us when it’s convenient for you at (508) 864-7758.

We look forward to serving you!