What’s Causing Your Cash Flow Problems?

What’s the one thing every business needs? Not what it should have, or could have, or would benefit from. What does it need? Some might say a strong workforce; some might say loyal customers; some might even say a strong marketing strategy. These are all important, certainly, but they all revolve around the one thing that your business simply would not, and could not, exist without. Money.

It might sound cynical, but that’s the truth. Without money a business isn’t really a business, in fact, it’s little more than an incredibly expensive hobby. Many business owners want to downplay money’s importance because they want to focus on the things that they really care about, taking care of customers, innovation, following their vision. There’s something admirable about this attitude, but it means that you’re often putting your business is quite a lot of danger. This is because if you’re not fully aware of just how important money is to your business, then you’re going to end up neglecting your finances all too often. If your business is having some kind of cash flow problem, then the very last thing that you want to be doing is ignoring it. Instead, you need to make an effort to looking very closely at what it is that’s causing any financial issues that you might be having. Only that can you actually start to do something about it. With that in mind, here are some of the most common things that can cause cash flow problems for a business, and what you can do to avoid them.

Too much expenditure

Every business has expenses; there’s no doubt about that. But the key to a successful business is making sure that you’re always balancing your spending with your income. The problem that many businesses have, especially new businesses, is that they get so wrapped up in things that they assume that they need that they end up wasting large amounts of money with no real benefits. The best thing to do is to look at your business and ask yourself how many different elements of it are actually beneficial. The most common way that business ends up spending far too much money is through employees. Figure out how many of your employees are actually essential. If you have more than you need then consider trimming the fat a little bit. Not only is that going to decrease your outgoings but it can also increase productivity as well since your employees will have more to do throughout the day which is actually more likely to keep them motivated. The same goes for things like technology. It’s easy to get carried away buying new technology as an attempt to remain competitive, but you should only ever invest in technology that your business really needs. Otherwise, it’s just going to be a waste of money.

Unpaid invoices

People don’t like to spend money if they don’t have, that’s just a simple face of human nature. So if you customers realize that they can get away with putting off paying you for as long as possible, you can bet they’re going to do just that. There’s nothing more frustrating for a business owner than sitting on a giant pile of unpaid invoices. When this happens, you end up slipping further and further into the red as business costs pile up and you don’t have any income to balance it out. This is where things like AR factoring come in incredibly useful. AR factoring is a great way to give your business the cash injection that it really needs. Essentially, you sell your accounts receivable to a third party which allows you to keep your business financially solvent even when customers are refusing to pay. That way you can focus on getting them to pay their invoices without also having to worry about your business falling into any kind of serious financial danger.

Too much inventory

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This is an incredibly common problem, especially for business for whom manufacturing and logistics are an important component. Sitting on large volumes of inventory that you’re unable to sell is just going to end up taking up space and tying up cash flow. It’s a good idea to make sure that you’re only ever bringing in new inventory that you are absolutely sure is going to sell. There’s nothing wrong with taking a risk now and then but it’s incredibly important that you don’t let stock levels pile up to the point where you’re sacrificing space in your warehouse to accommodate items that simply aren’t doing anything.

Poor bookkeeping

Setting up a business involves a huge amount of work, there’s no doubt about that. Unfortunately, that workload often means that many business owners end up putting important tasks to one side. One of the most common tasks that gets neglected all too often is bookkeeping. It can be a fairly dull, fairly arduous tasks, so a lot of business owners tend to put it to the back of their minds. The problem with that is that you can end up a pretty large amount of trouble without realizing why if you’re not careful about monitoring your finances. Ignoring your books can lead to invoicing mistakes, unpaid tax, and any number of other problems. Not only do these problems cause issues for your finances but they can also get your business into some serious legal trouble as well.

Don’t take any of this to mean that the other elements of your business aren’t incredibly important. Employees, customer satisfaction, marketing and everything else are crucial parts of any business. However, it’s important to remember that you won’t be able to focus on any of these things without first having a secure bottom line. If you can’t pay your employees, then there’s no point worrying about their productivity levels. Similarly, there’s no sense making plans for your marketing strategy if there’s no way for you to actually pay for it. Like it or not, money makes the business world go round, so you need to make sure that it’s at the very top of your list of priorities.


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