Whether you’re just starting your small business or you’ve been operating for a few years you’ve undoubtedly experienced cash flow problems at some point. Any cash flow problem can be troublesome for the growth and success of your business, and no small business is immune to the many different types of cash flow problems.
Today, we’re going to run though a number of problems you may encounter in your small business when it comes to the flow of cash.
This area of any small business can become a full-time job. And what business owner has the time to really focus on this one facet of their company? Not many. Which is why mis-managed invoicing can be quite a common cash flow problem.
Structuring and planning your invoicing terms is crucial to your business turning a profit and growing. No one wants to have money sitting uncollected. Or worse yet, not being able to be collected because you gave forgiving payment terms for your products or services. Be on top of your invoicing net terms as best as you can.
Too Much Overhead
Every business owner knows why they have their overhead costs, but when was the last time you really examined where each line item is being allocated? The normal costs like utilities, rent, and payroll costs can’t really be prevented. That’s basic overhead. Be on top of your overhead by taking the time to look at the allocation of each expense. If you have high overhead expenses, it may be time to analyze where you can cut back.
Too Much Production
Are you manufacturing too much of your products? It sounds strange as a business owner when you think about it, but unless you’re a big box retailer or manufacturer, you don’t need thousands of each product in your inventory. It will all end up just collecting unwanted dust on shelves in a warehouse you may not even have room for anyway.
Audit your inventory and any upcoming production orders. Taking the time to do this can save you much needed cash flow and prevent problems in the future. It will also give you an opportunity to understand your customers more as you can plainly see which products are selling better than others. Order what you need, when you need it with more accurately mapped sales forecasts possible from doing a thorough examination of your inventory.
Not Keeping Reserves
This can be a big source of cash flow problems. When a small business has little to no cash reserves they’re unable to handle any unexpected expenditures, let alone emergencies. In kind, what they end up doing is taking out loan after loan to cover any unexpected costs or overages. Robbing Peter to pay Paul never ends good for the one having to do it.
This is one of the easiest cash flow problems to rectify in small business ownership. Revising and auditing your budget to find out where you can save on expenses is the place to start. Once you know where you can save be sure to allocate that money into an account strictly allocated for cash reserves.
Many a small business owner has just decided from day one that they would handle the bookkeeping themselves. Some have even gone off and chosen to not keep them at all thinking they would just hire someone later to get on top of it once things took off. These are common, yet big mistakes for small business cash flow. Doing the books for your business is about as entertaining as watching paint dry for most people. Yet do not be an owner that makes the mistake of not doing it.
Hiring someone who knows and actually enjoys the art of numbers otherwise known as bookkeeping can be truly invaluable to your small business. They’ll keep track of payments, outstanding invoices, any loans your business may have outstanding, and keep things running smoothly. A good bookkeeper will also be able to help build your cash reserves and maintain a strong cash flow for your business.
If you’re looking for help in managing the cash flow of your small business or need guidance to get it back under control, call Numetrica today and let us show you how we can help your small business thrive! We provide many services like the ones described in here and many more. Don’t hesitate, contact us today!