Money drives all businesses forward, this much is an unassailable fact. But at some point as a business, we can encounter cash flow problems that restrict our growth and leave us struggling in the reeds when we should be sailing on the high seas. These problems all have solutions but what is the right one for your business?
Cash flow problems
A cash flow problem is often otherwise more diplomatically known as a “poor cash flow situation” and essentially refers to any situation where your business is spending more money than it’s bringing in. This might not be a problem if it happens once in a while but if it’s a sustained problem it can prove damaging and even fatal. Of course, the major cause of cash flow problems in the last 12 months has been the COVID-19 pandemic but that is something we’re all still figuring out. More commonly, poor cash flow is caused by one of the following reasons:-
Low profits – This can be caused by a multitude of factors. Perhaps your marketing and sales teams are not working well together? Or maybe you’re not charging enough for the stock you’re able to shift and your staff are unproductive?
Over investment – You’re ordering more stock than you are selling or you’ve invested too much money in a new venture that isn’t pulling its financial weight. You could also lump expanding too fast and too soon into this bracket.
High overheads – Is your rent too high or are you paying too much for your utilities? It might not seem like a big deal but it all adds up. Unexpected expenses are also overheads that can put major stress on your business and we’ve all experienced more than our fair share of those lately.
Cash flow solutions
Of course, there’s no one right answer here but there are a few pieces of vice that should ring true whatever your poor cash flow situation.
Finance – You might have that rainy day reserve fund you promised you wouldn’t touch unless you absolutely had to. Well, maybe now is the time. Working capital is a must for a growing business if it wants to stave off stagnation. If that reverse eludes you, meanwhile, there are always commercial cash flow finance loans to consider on a short-term basis to help steer the flow in the right direction.
Grow steadily – Don’t try to put all your eggs in once basket and grow too fast. If you net a major client you’re not prepared for then you could end up doing more harm than good. Take a breath and be sure you have the resources available before making any major growth commitments.
Pay attention – Keep a close eye on your cash flow at all times (there’s software for that now, you know), pay attention to the pricing of your services and your products and prepare for anything. Cash flow problems are always going to be a point of contention for businesses but if you know what you’re dealing with it’s a much easier pill to swallow.