Tuesday, March 19, 2024

7 key steps you can take to respond to cash flow struggles in your business

Many businesses struggle with cash flow problems, which may occur when more money is flowing out of your business than is coming to your business. Cash flow problems may be caused by a variety of factors, including seasonal fluctuations in sales, low profit margins, and poor financial planning. As a result, if you experience a cash flow shortage, you may not have enough funds to cover payroll or other operating expenses. It’s crucial to develop a strategy or plan, which can help you handle this issue and prevent a cash flow crisis from happening. Within this article, you will find seven key steps you can take to solve your cash flow struggles.

Adjust Your Business Plan

Encountering a cash flow shortage means that you should closely inspect your current business plan, processes, expenses, and operations. It’s important to determine why you encountered a cash flow problem and consider whether this is likely to become a recurring issue. This means that you will need to develop a strategy to help you handle future cash flow shortages. You can also look at individual areas of your business, including jobs, clients, events, employees, marketing strategies, products, and services. As a result, you can see which areas of your business generate the most and least income.

Evaluate Your Options

You will need to evaluate the options available to you and make an informed decision to solve this problem. Consider what you can do to bring more money into your business, whether that’s a credit card advance or a short-term loan. For example, payday loans can be particularly useful when you are faced with a cash flow shortage. Payday UK has made it easy to gain access to a loan from an industry-leading panel of lenders, which can save you time and help you get your business back on track. Once accepted, the money will typically be transferred on the same day.

Speed Up Your Receivables

There are many ways you can accelerate your receivables and bring extra cash to your business. For instance, you may want to offer and accept pre-orders for a product before it hits production. You can also ask new customers for a deposit or partial payment upfront instead of billing the whole amount due in a single invoice after products have been delivered. Start sending your invoices early and more frequently rather than waiting for the full completion of the job, as this means you will receive payment more quickly. Remember to make it convenient for customers to pay by offering a range of payment methods.

Reduce Other Expenses

If overspending makes things more difficult, you may find yourself cutting the largest expenses, such as inventory, marketing, or labour. However, this can be an expensive mistake, as these aspects are core to business operations. Instead, it would help if you focused on reducing your business spending without sacrificing the quality of customer service. Then, you can review your overhead expenses, including rent and utilities. Consider where you can cut back and try to get better rates or renegotiate your contracts. Be honest with your vendors and enquire about delaying payments.

Have A Clear View Of Inventory

If you run a product-based business, you should know the importance of keeping tabs on how much merchandise is available. You will need to develop a clear sense of how much inventory you have at any point, as otherwise you run the risk of overstocking and thus creating waste. It might be useful to invest in an inventory management system that can be integrated with your accounting software. This will allow you to maintain a real-time view of stock, as well as how much you paid for each product and how much you actually need at different times of the year.

Create Cash Flow Forecasts

One of the best ways to solve a cash flow issue is to prevent a shortage from occurring in the first place. Therefore, you should start creating and using cash flow forecasts, which will show you how much cash reserves your business needs over the next months. Cash flow forecasts are simple but often underused accounting tools. For example, if a seasonal dip in sales is expected or you may need to fulfil a one-off requirement for cash, you can take precautions now so that there is no negative impact on your business.

Improve Invoicing

It’s important to stay on top of your invoicing in general, as this will help you benefit from healthier cash flow. If you find that invoicing is consistently lagging, now might be the right time to find good accounting management software. Thanks to this, you can ensure accurate and timely invoices while avoiding potential errors that often occur with manual bookkeeping. You will be able to keep track of all transactions, as you will have access to a dashboard with an electronic trail of all related records. This will come in handy when it’s time for auditing.

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 pandemic having a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £33.60 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.









Latest news

Related news

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close