How To Deal With Business Cash Flow Problems

Written by David Beard on January 29, 2019

Updated March 10, 2022

Man looking into business cash flow issues

While all business owners, small or otherwise, dream of affluence and positive business transactions, sometimes life gets in the way and business starts to suffer, leading to cash flow issues beyond your control. If this is the case, then accessing and ultimately addressing the situation as quickly as possible and regaining control of your business finances is key.

Allowing your finances to spiral out of control can be dangerous and put you and your business at serious risk.

Do an audit of the business finances and work out where your money is going

If you’re going to make cuts to your outgoings to aid in repairing your cash flow, you need to know exactly where the money is being spent. Take the time to look through your receipts, bank statements and review both your incomings and outgoings to see where exactly you can afford to make savings.

Doing this can also bring to light a number of other benefits for your business, such as where your products are performing well and where they are not. An audit will allow you to analyse all aspects of your business and use the results as the next steps to improving your finances.

Compare profit margins across multiple clients to see which products you should be marketing at a higher cost – if a particular product is already selling well, for example, but it has a low-profit margin then additional marketing would be more beneficial used against something that will bring in a larger profit.

Cut costs

Arguably the most logical thing to do when faced with financial issues is to cut costs wherever possible, but that’s not to say that it isn’t tricky to do. Often, outgoings are difficult to cut down as the vast majority of them are business essential.

Identifying costs that aren’t business essential would have been achieved in a business audit. Aspects like negotiating rental costs with the landlord of your office or storefront may well help you to lower cost. Landlords may well be willing to negotiate your rent if they believe that they will lose out from you going elsewhere – they do not want to lose your money.

Consider using different, more reasonably priced suppliers and see if you can cut the cost of your utility bills or your business insurance costs. Every little helps, and small cuts can add up to serious amounts of money over the course of a financial year.

If your business is growing in size, but you don’t currently have the financial means to support the expansion, then you could consider taking out a line of credit to set you off in the right direction. Taking on new clients is exciting but making sure you have the money behind you to be able to afford to do so can be by contrast extremely tremulous. Taking out a line of credit in such a situation could be beneficial to you as you will be able to pay off the outstanding debt as soon as the new client has paid for your service. You have made a new connection and a possible returning customer and, assuming you get a good deal, have done so at a minimal cost to your business.

Settle accounts

One of the major causes of cash flow problems within companies is defaulted payments by their clients – there are multiple things that you can do if this is the case and you have been owed vast amounts of money by particular clients for a significant amount of time.

As a short-term fix, monitoring customers’ accounts and ensuring that they are paying outstanding payments on time reduces the chances that they will default on their payments. Know your customers and their accounts inside out- if they are repeatedly defaulting on their payments, then do something about it.

You should have an established debt recovery strategy readily available for clients to see – let them know the consequences if they fail to pay for your services- and by doing so, you are ultimately protecting your business and its assets.

Be quick to chase any late payments and ensure that any invoices are sent out promptly. Have terms and conditions set out for your client to read if they fail to comply with the conditions of your invoice and consequently fail to make a payment – late payment charges are a thing and can be applied if clients fail to pay their invoice on time.

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