Cash Flow Challenges: Common Issues and Solutions

How is business going? For most companies, the answer changes every month. After all, very few businesses maintain steady revenue throughout the year. But if you’re consistently having trouble paying your bills, you may have cash flow common issues with cash flow or moving money and cash reciprocals in and out of your commerce. Here are 13 tips for understanding your cash stream’s common issues.

Common Cash Flow Common Issues

  1. Underestimating Startup Costs
  2. Expecting Profitability Too Quickly
  3. Not Creating a Cash Flow Budget
  4. Overlooking High Overhead Costs
  5. Collecting Receivables Too Slowly
  6. Growing Too Quickly
  7. Low-Profit Margins

13 Tips For Managing With Cash Stream Common Issues

1. Utilize A Month-To-Month Trade Budget

In the event that your commerce is regular or the cash stream tends to rotate, an exact yearly budget and cash stream explanation can deliver you an understanding of how much money you’ll need each month. To pay recurring bills. You’ll need to save money during the high-income months to cover general expenses during the low-income months. Monthly cash flow forecasts can reveal potential shortfalls and give you time to seek out more cash if needed.

2. Access To The Credit Limit

If you have limited cash, one solution is to set up a line of credit. Just like with credit cards, you’ll have money to spend and pay back during the most favorable months of your business cycle. Unlike a term loan, you only pay for what you use, plus interest on the outstanding balance. Even better, once you pay it off, your credit line will be replenished and available again whenever and if you need it.

3. Invoices Quickly To Reduce Overdue Dates

While your business may offer customers a 30 to 60-day payment period, you may need the money sooner to pay bills, order inventory, and more. In this case, you cannot wait for the payment to be due. One solution is to give your customers a discount in exchange for paying in advance. Alternatively, you can use bill factoring. This financial product allows businesses to sell receivables at a discounted price to a third-party figuring company. The figuring company progresses up to 90% of the bill and is responsible for collection.

4. Debt Extension

Extending your supplier’s billing cycle is a popular way to get cheap funding. With this strategy, you simply choose to pay some bills after the due date. However, this is not a long-term solution, as it can affect your credit and worsen your relationship with suppliers. There are two ways to protect yourself if you decide to extend your debts. On the one hand, you can negotiate the due date to the date when you are sure you can pay. Or, you may want to completely review your payment agreement. Some service providers allow annual or semi-annual payments instead of monthly. Paying annually in advance can even get you a discount.

5. Cost Reduction

Does overspending make you fall into a deep pit? Many companies solve this problem by reducing the most important costs, such as inventory, marketing, or labor. This is a mistake, as they are often the heart of the business. Instead, consider cutting non-essential expenses like landscaping or cleaning the house first. Next, check your operating expenses, including rent and utilities. See where you can get a discount, get a better rate, or renegotiate the contract.

6. Price Increase

Selling a product or service at too low a price can negatively impact your bottom line. Take a step back and examine your products and services to determine the full cost of delivering them. With that cost in hand, you can determine if you’re charging too little and hurting your bottom line.

While many companies shy away from the thought of ​​raising costs and possibly estranging clients, investigate appears that clients are more likely to acknowledge a cost increment in the event that it comes with a made strides involvement. Concurring to Cost Waterhouse Cooper, 43% of shoppers will pay more for convenience, and 42% will pay more for a friendly and welcoming interaction in-store. It pays to experiment with everything to get the best results.

Start with your best-selling products or those with less competition in the market. If it doesn’t affect sales, you can go ahead and roll out price hikes for the rest of your product line.

7. Up-Sell And Cross-Sell

Increasing sales is an easy way to increase your cash stream. It’s indeed simpler when you’re offering to clients who are, as of now, fans of your product or service.

Two Classic Approaches:

Upsell or upsell improved and more expensive products or services to the same customer and cross-sell or seek to sell different products and services to the same customer. For example, a gym might consider selling a six-week workout package with a new membership agreement. E-commerce sites often cross-sell to their customers with the title “You may also like…”. Two techniques are to make the offer natural or not pressurize the customer. Your goal is to keep your existing customers happy and buying your product or service.

8. Credit Cards Are Accepted

Accepting credit cards means faster payments and less bad debt. It also improves purchaseability. A survey by Square reports that 35% of customers would shop somewhere else in case a trade didn’t acknowledge credit cards. Be that as it may, credit card companies often charge merchants for using their services, so you need to weigh these costs against the benefits of faster checkout.

According to a survey by Bank of America 2019. The same survey found that more than half of customers use a credit card in person or online when purchasing goods or services from a small business.

9. Accept Online Payments

Like credit cards, online payment options — and e-commerce stores in general — make shopping more convenient for your customers. It can also help you move inventory more efficiently. Take, for example, a non-store bakery business. There is little control over how many pastries are sold or thrown away on any given day. If the same business switched to ordering online, they could save money on their stores, cook to order, and possibly even deliver nationwide.

10. Maintain A Clear View Of The Inventory

If you are a product-based business, you know that you need to keep track of how much stock is available. If you don’t have a clear idea of ​​how much inventory you have at any given time, you run the risk of overstocking, causing waste, and tightening cash flow in that stored inventory. Consider contributing to a stock administration framework that coordinates together with your bookkeeping computer program.  This way, you’ll keep track of your inventory in real time, how much you paid for each product, how much you actually need at any given time, and more.

11. Reduce Costs By Identifying Waste

Do you add unnecessary materials like common issues and branded bags to your products? Maybe it’s time to lighten your packaging. Are some products slower than others? Instead, consider phasing out and focusing on your best-selling products. Is payroll taxes becoming a tribute? Consider reducing overtime and redundancy as much as possible.

12. Improve Margins With Supplier Discounts

If you’re a good customer, your suppliers might be happy to give you a break. Or, they may add perks like free shipping or additional products, especially if you’re buying in bulk.

13. Improved Payments

Are you at the top of your bill? The faster you send an invoice, the faster you’ll get paid. And vice versa, you will benefit from a healthier cash flow. If payments are consistently late, it may be time to contribute to the bookkeeping administration program. The most excellent bookkeeping program makes a difference. You guarantee precise and timely invoices and avoid potential manual accounting errors. You will have a dashboard with a real-time view of all transactions and an electronic record of all related records, which will be very useful when auditing.

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