Afraid of appearing underwater, many small businesses risk actually going under when a twenty-minute conversation with their bank could yield immediate results. Develop a Relationship with Your Bank:īanks aren’t known as the fuzziest of institutions and many business owners would rather do their own taxes than approach their bank for an additional loan. Having a strict billing policy that you follow-up on and making it worth your customers’ while to pay immediately are valuable first steps on the road to an end to cash flow problems.
As local fixtures with deep community roots, small business owners often hate to remind their customers when a bill has come past due. Small business owners will recognize this scenario: Loyal customers paying late. Whether this infusion comes from a personal account or some other form of asset reallocation, these temporary fixes are no replacement for a thorough examination of the how’s and the why’s of your businesses’ cash flow issues. In order to remedy cash flow issues like Beth’s, many small business owners try to stanch the problem with a quick cash infusion from somewhere else. Instead, Beth has a cash flow problem because she isn’t clairvoyant. Beth has a cash flow problem, but not because she is a failure. She’s having trouble filling orders and dog-owners are getting angry. Seems great, right? Well, here’s the problem with Beth’s rise to success: She knows the orders are going to keep coming in, but right now, she doesn’t have the funds to buy all the supplies and to pay her employees. Owner Beth recently received the chance of a lifetime: A spot on a nationally syndicated show that raved about her products. All the best-dressed pups at the dog park eat from Beth’s at least twice a week. Seem counterintuitive? Let’s look at an example:īeth’s Biscuits is a local business selling organic dog treats in a variety of flavors. If you find yourself unable to cover your business costs, you are suffering from a cash flow problem, but you aren’t necessarily captaining a sinking ship. While no business can operate in the red for too long, persistent cash flow problems often signal larger structural issues that small business owners would be wise to address ASAP. A business can find itself struggling with cash flow issues when sales are lower than forecasted for a given period or a large payment isn’t remitted on time, for example. The Whys and the Hows of Cash Flow Problems:Īdequate cash flow is necessary to keep businesses of any size afloat, but a recent Discover Small Business Watch survey found that an alarming 50% of small business owners report that they experience cash flow difficulties.Ī business suffers from a cash flow problem when it spends more money than it earns. Here, we’ll take a look at some of the most common reasons that businesses end up with cash flow problems, and provide you with the strategies to get your ship back on course. While not having the money to pay your employees or to cover this month’s rent is both nerve-wracking and gut-wrenching, small business owners take heart: With some solid research and planning, there will be be a solution to those persnickety cash flow problems. And it’s no wonder: Poor cash flow can put you out of business in no time. However, small business owners are also known for something else: A tendency to struggle with cash flow problems.Ĭash flow issues strike terror into the hearts of even the most seasoned business owners. Small business owners are known for their creativity, ingenuity, and the passion that compels them to turn their visions into reality, often against overwhelming odds.