If there is one surefire thing that can stop a business dead in its tracks, it would be problems with cash-flow. If your cash reserves run dry, you’ll be left scrambling to find a way to pay your employees, keep current with vendors, and stay out of default on larger debts and loan.
The worst part about this type of problem isn’t that it happens to businesses all of the time, but these cash-flow disasters are often avoidable through preventative preparation and planning.
Know How Much Cash You Have Access To
Being a small-business owner means having to keep up with a myriad of constantly-changing facets of your company. But undoubtedly, one of the most important things that you should always be up-to-date with is your company’s cash reserves. Not only will always knowing how much money you have access to help in catching and averting cash flow disasters early, but it will also allow you to make well-informed decisions much more easily in a much more prompt fashion.
Consider External Billing Solutions
Many leads of small companies think that handling billing and accounts receiving in-house is the smartest decision for an organization of that size – but this isn’t always true. For small companies who have just a few people soliciting, receiving, and processing payments (or even worse, no dedicated employees), it’s easy for a small interruption in billing to turn into a serious cash-flow issue. Consider moving your billing to an external company who can ensure that no unexpected troubles with your staff or office will get in the way of you getting paid.
Re-Examine Your Fixed Expenses
It’s not always unexpected expenses that can cause cash-flow issues. Sometimes, it’s simply a case of failing to manage fixed and regularly reoccurring bills and obligations – especially during periods of slower sales. One great way to help disaster-proof your business is to always be re-examining your company’s fixed expenses, and look for anywhere that you can trim a little excess fat. On top of finding it easier to weather periods of weak business, you’ll notice a pleasant extra addition to your bottom line while business is going well.
Always Have a Backup Plan
Even if you are constantly reviewing your balance sheet, implementing error-eliminating billing solutions, and shrinking your fixed expenses to the bare minimum, you can’t always fully protect yourself from a cash-flow disaster. Sometimes, thing are simply going to go wrong – and when they do, it’s important that you have a backup plan in place to save the day. Being prepared ahead of time lets you better survey your options, and make a better and less frantic choice of what to do in the event you wind up running into problems. Potential backup options to look into include establishing a line of credit with a lender, setting aside your own personal funds for an infusion, and having potential partners willing to purchase a share of your business.
A small business’ cash-flow is extremely dynamic – it’s always changing and can even vary greatly from day to day. This, combined with the fact that most small businesses don’t have the resources to survive a financial disaster, means that you should always be monitoring for cash-flow problems early and taking steps to reduce expenses and ensure you’re being paid in a timely manner. In reality though, not all cash flow disasters are avoidable, making it even more important that you make sure you have a backup plan in place as a last resort.
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