Constant cash flow is one of the major preconditions for small business growth. Most startup companies face many different issues that concern this important business segment. Since these issues can jeopardize their whole business and possibly result in bankruptcy, entrepreneurs need to approach them seriously and find the most strategic and effective solutions. This requires a lot of reading, expert mentoring in some cases and of course an elaborate online research. In this article we reviewed some of the most common cash flow issues and best ways to solve them.
Issue: High Expenses
Many entrepreneurs underestimate expenses required for running their business. In most cases they only take into consideration expenses that are directly connected with production or sales, and leave out rent, maintenance and utility expenses from their business plan. These expenses can create huge pressure, and suck up big parts of company’s revenue, especially in the first years of doing business.
Solution: Austerity measures
We heard a lot about austerity measures that countries apply for dealing with economic crisis and recession. Small companies should do the same. They need to audit all additional expenses they are paying. While doing that they need to be careful not to disrupt company’s regular business flow. They should also start looking for less-expensive office space, affordable phone & internet and other bundle packages.
Issue: Lots of goods on stock
Companies that are into production need to get rid of their products as fast as possible. If they don’t do that, they will end up with huge product inventories. These can tie huge portions of the funds companies invested in production and create additional storage expenses.
Solution: Sales and discounts
Best way companies can get rid of large inventory is through large sales and discounts. This way they will take back their invested money and boost their reputation among the consumers. People like companies that organize regular sales, and entrepreneurs should tie them to various holidays and special dates like: Black Friday, Cyber Monday, Christmas, Valentine’s Day, etc.
Issue: Inability to attract investors in later stages of company’s development
Attracting investors is crucial in first phases of company’s development. In later phases, investments can make companies more competitive and can be used for introducing further product updates. Inability to attract later investments, results in slower business growth.
Solution: Master your presentation skills
In first phases of company’s development making a top notch business plan is crucial for attracting investors. Later phases are not much different. In addition to that investors also need to master their presentation skills and learn how to present their business results in an attractive and intriguing way. They can search for investors on venture capital and investing events and conferences, as well as on crowdfunding websites, where masses of micro-investors are funding projects that find interesting.
Issue: Inability to collect debt
Debt collecting can be difficult and tiresome. In addition to that lots of bad debt can result in problems with cash flow and can eventually lead to bankruptcy, especially if entrepreneurs decide to wait the court settlement.
Solution: Be stubborn, polite and ask for professional help when needed
Entrepreneurs need to stay polite when trying to collect their debts, no matter how lame and unconvincing debtors’ excuses sound. They also need to be stubborn and constantly send notices and reminders. Statutory interests and late-payment fees need to be applied to the debt’s sum, and companies need to block all services they provide to debtors. If company’s not able to collect its debt in several months, it is always better to ask professionals for debt recovery help, than to wait until court settlement.
Constant money flow is one of the most important parameters for company’s further development and business growth. That’s why entrepreneurs should invest both their time and capital in solving all problems that arise in this business segment and try to find ways for making their invoices run faster and smoother.