Accounting & Bookkeeping

How to Fix Cash Flow Issues in Small and Mid-Sized Businesses?

Written by Analytix Editorial Team | February 27, 2020

For small business owners and startups, cash flow often becomes a hurdle that keeps them from achieving their full potential. Part of the struggle stems from tight margins, and at times from a smaller client base, which ultimately means fewer cash flow channels.

According to Intuit’s 2019 State of Cash Flow Report, nearly two-thirds (69%) of SMBs are still experiencing cash flow challenges. As a result, a lot of small businesses constantly look for ways to improve their cash flow. Here’s how you can tackle these five common cash flow issues:

  1. Poor Bookkeeping and Lack of Cash Flow Budget

Accurate, timely bookkeeping and cash forecasts make cash flow management much easier. The cash flow budget is a critical piece of the puzzle and allows you to know ahead of time when to arrange for extra cash or reach out to customers for overdue payments. However, most small business owners struggle to dedicate time towards bookkeeping and cash flow forecasts. Therefore, choosing a software can greatly help in automating bookkeeping, track available cash, and anticipate inflow or outflow of cash. Thus, making it less time-consuming for owners and providing a bird’s eye view of the business as well.

  1. Late Payment

Keep a close eye on your outstanding invoices and follow up with late payers and encourage them to pay on time. Maintaining an up-to-date list of outstanding invoices will help you keep a check on overdue clients. You can consider offering a discount and following up promptly to pay sooner. Similarly, getting additional terms from some of your vendors can immediately solve some of your cash flow issues. You can improve cash flow for your small business by matching the supplier’s terms of payment to the customer’s terms of payment. If you can go to your vendor and pay them two to four weeks later and go to your clients and get paid two to four weeks faster, that can be a game-changer and solve cash flow problems automatically.

  1. Impulse Spending and Overspending

Rookie small business owners often go overboard in purchasing inventory or services they don’t need or can’t afford. When was the last time you looked into all the different monthly expenses in your business and looked to cut costs? Most people don’t do this enough. Time goes on, and next thing you know, you have racked up recurring bills for services you don’t need anymore. Doing a business expense analysis helps you evaluate how your expenses contribute to new sales or retention of current clients.

  1. Traditional Invoicing

Using cloud technology to automate invoicing helps you generate invoices quicker, maintain accuracy, and get cash faster. It streamlines the billing process to speed up the time it takes to get the invoice into the client’s hand. With one click invoice processing, automation reduces the time you spend on recurring invoices. Automated payment reminders through emails and providing multiple payment options encourages clients to pay promptly, which also speeds up cash collections.

  1. Insufficient Cash Buffer

A cash buffer works as a financial safety net. As a revolving business line of credit, an overdraft facility with your bank can provide you a buffer when things are tight or opportunities arise. When you are growing fast, dealing with cash flow issues can prove challenging since you are selling services but not collecting money fast enough. Having a credit line in hand can be instrumental in solving cash flow issues. However, you must also keep an eye on how close you are to the overdraft limit.

Fortunately, technology has brought about a multitude of tools to save small business owners from cash flow headaches. At Analytix, our proprietary tools and applications ensure you have access to most up to date information to make cash flow management much easier.

Next Steps

  • Visit us to know how we can solve your cash flow problems
  • Talk to our experts on 781-503-9002 or mail
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Written by

Analytix Editorial Team
Analytix Editorial Team

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