Small Business Cash Flow Crisis: The 9 Best Solutions Available

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Last Updated: March 9th, 2021

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Budgeting

The word "cashflow" written in chalk on a green chalkboard

Guest Post by Natasha Lane

The simplest rule of running your own business is knowing that in order to make money, you need to spend it first. Most of the time, this will be a real balancing act, so you’ll need to educate yourself on the ways to solve (and prevent) a cash flow crisis.

First and foremost, be honest with yourself. Are you here to learn something new, or are you already facing money issues? Regardless of your answer, remember: Do. Not. Panic. Every problem has a solution. Consider all your options in a calm and collected manner, and you’ll be able to make the most of these nine hacks.

1. Create a system that works

As an entrepreneur, you need to remember that 99 percent of your success relies on organization and time management — especially if you’re the only employee in your company. That’s why you need to set aside the time to create systems that will work for you.

Familiarize yourself with spreadsheet software options such as Google Sheets, Microsoft Excel, or Apple Numbers, and use them to track your finances. Create columns or tabs that will give you easy access to data such as the following:

  • Incoming funds (including sources and payment dates)
  • Expected expenses (along with deadlines)
  • Money put aside for unexpected costs
  • The money you have that is currently tied up

2. Stay on top of payments

One of the surefire ways to avoid debt is to ensure you’re making all payments on time. This will prevent your expenses from piling up, allowing you to have a better idea of how much money you have available. Being vigilant about outgoing costs will also minimize the risk of having to pay interest rates. You can use a spreadsheet system, or even a simple calendar to keep track of all important due dates.

Most business owners prefer to take care of expenses first, but if you’re confident about your planning skills and cash flow, you could also create a timeline that allows you to make the absolute most of your receivables before settling costs.

3. Know your funding options

In many cases, the simplest fix to a cash flow crisis is the best one. If you’re in the process of expansion and need a boost to your capital, you can look at traditional and alternative financing solutions. Seek out options that allow you to tailor the repayment terms to your personal needs so that you can reap all the benefits without putting your company at risk.

4. Accelerate receivables

One of the things entrepreneurs particularly struggle with is invoicing their work. This is a task you do not want to put off, unless, of course, you’re willing to risk not being paid on time. If you don’t have money to waste, you might want to start sending out invoices more frequently. Or try setting up a system that will (gently) remind your clients that their payment due date is approaching.

Furthermore, make it easy, heck, make it beneficial for your customers to pay you on time.  Are you developing a new product? Enable pre-orders. Do you offer services such as consulting, writing, tutoring (or anything else)? Offer a monthly subscription fee that’ll give you a steady source of income.

Offer payment plans that will break large sums into smaller parts. This way, you’ll have access to needed funds before you’ve even completed a project. Don’t be afraid to get creative, as it might just allow you to create the cash flow system you need.

5. Negotiate payables

The fact is, the expenses of running a growing business often exceed the rate at which you’re able to make money. Sure, you could back down from expansion, but you could also negotiate with your suppliers regarding payment due dates. Solutions such as supply chain finance have proven time and again that they can be used to overcome cash flow crises. If it worked for Nike, it just may work for you.

6. Don't tie up money in inventory

That’s another mistake small business owners tend to make. Sure, you want to be prepared, but is purchasing a full year’s worth of inventory really the best way to go? Not only does this take money out of your budget for other things, but it may also be creating unnecessary costs in terms of storage space.

Do keep in mind, however, that there is an exception to this rule. Ordering larger quantities of products or materials could be a way to save money. This is due to the fact that suppliers will be more willing to offer discounts on big purchases. If you know that you’ll be making an order every couple of months, you could try to negotiate better purchasing terms. Why not ask for a better price or a payment plan that will suit your cash flow more naturally? Asking won’t cost you a thing, and you may just end up saving a ton.

7. Build strong relationships with partners

If you’re not already paying attention to your relationships with vendors and suppliers, it’s high time you started. While the business world can be ruthless, making sure that the people and companies you cooperate with are happy is a great way to secure your future (and optimize your cash flow).

Of course, this doesn’t mean that you should be working at your own expense in order to satisfy all their wants. Rather, it’s about showing them that they’re valued. Even a small loyalty discount or the willingness to meet someone halfway in a difficult negotiation can make a lot of difference. This way, you’re not only building a stronger foundation for your business relationship, but you’re also developing a connection that you can all benefit from, both in the present and the future.

8. Tighten your belt

You probably already know this, but it may not be a bad idea to go through your assets and expenses, eliminating those that are not an integral part of you actually making money. You’d be surprised at how much you can save by evaluating your costs.

9. Bring in help

Last but not least, if you’re facing an imminent cash flow crisis, you should consider bringing in a professional to help. You can choose to consult a financial advisor, or even hire someone more experienced than you on a full-time basis. This could greatly contribute to your bottom line, freeing up your time to do the things you excel at.

The bottom line

There you have it, nine easy solutions you need to start implementing today if you want to fix or avoid a cash flow crisis.

If you find that the idea of financial troubles is causing you anxiety, practice getting into the habit of regularly reviewing your company’s finances. Similarly, it may not be a bad idea to start getting into a more positive mindset. After all, some of the biggest brands in the world are where they are because they had the courage to turn obstacles into opportunities.

Natasha Lane is a lady of a keyboard with a rich history of working in digital marketing and growth hacking fields. She is always happy to collaborate with awesome blogs and share her knowledge with the hope that someone out there will find it quite helpful.

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