No matter the size of your business, it is inevitable that you’ll run into cash flow problems at some point. Although it is a major headache to run into these problems, it’s important to know that you’re not alone. Many companies, big and small, suffer from the negative impact that cash flow problems can cause. If your business has employees, these problems can trickle down to them and tarnish both payroll and the reputation of your business. As one of the leading factoring companies in the US, we have heard it all. Here are the most common cash flow problems and a few simple remedies to get you back on your feet in no time.
Common Cash Flow Problems & Their Remedies
Late Payments from Clients
This is one of the most common problems that business owners, like you, face of a day to day basis. Because of the invoice based nature of your work, you are constantly waiting on payment from your customers. As expenses begin to pile, you begin to panic, because your clients have still not paid you for your work.
The Solution
There are many solutions to this very common problem. As previously discussed, there are many ways that you can get your invoices paid faster.Utilizing these tips can help get your invoices paid quickly so your cash flow doesn’t suffer. If this is not working for you, you can always utilize the benefits of non-recourse invoice factoring services. With non-recourse invoice factoring services, you can get immediate cash for your outstanding invoices – without incurring any additional debt. A factoring company will step in and purchase outstanding invoices to give you an advance of up to 96%, practically overnight. There are many types of factoring services that can give you even more benefits. From payroll factoring to spot factoring, these services will help combat the inevitable problem of clients making late payments.
Purchasing Inventory Before Selling It
For businesses that sell physical products, rather than services, you naturally have to invest in your inventory before you sell it. When your cash flow is low, this becomes an issue. When it comes time to reinvest in inventory, your cash flow can suffer. A major purchase, such as inventory, will set your business back from having the resources to complete orders, take on new clients, market, and much more.
The Solution
To better combat this issue, you must be strategic about your orders. Take note of when your suppliers offer sales and other promotional discounts and strike while they’re hot. This will allow you to stock up on inventory for a long period of time, while also saving money. If your vendor does not offer promotional discounts, it may be time to look elsewhere.
You Can’t Pay Yourself
Even though we have it drilled into our brains to always set aside funds to pay yourself, this can tarnish your stellar cash flow. Although you are your business, you have personal expenses that need attending to, but at what expense. We see many business owners that let their own salaries affect the efficiency of their business.
The Solution
This can be hard for some business owners to wrap their heads around, but you must pay yourself a modest salary. Another solution would be to take a disbursement from the company once you’ve paid your expenses and put money back into the company – for growth. Try setting aside a percentage of your profits each month to help you cover expenses during slow periods and other unplanned business expenses. This way, you won’t be taking funds away from your business to pay yourself
About the Author: Peter Amundson
Since 1991 I specialize in Invoice Factoring, PO financing and ABL facilities. I currently work internationally with companies in the US and Canada via our internet marketing division. Specialties: Accounts Receivable Factoring and Payroll Funding for Manufacturing, Oil & Gas, Telecommunications, Wholesale Trade Distribution, Staffing and Transportation. I always enjoy helping companies rise to the next level of success.
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