There are a number of things that you have to stay on top of as a small business owner. Unfortunately, when cashflow issues arise they tend to occupy the majority of your focus and energy so many other important tasks fall by the wayside.
Cashflow problems can result from a number of different things. Maybe it is a slow season for your product or service. You know that things will pick up again soon, but you have to find a way to make ends meet in the short term. Such problems can also arise when you are burdened by unpaid or overdue invoices that are beginning to pile up. If this is something that you are struggling with, introducing cash flow management software or similar tools is one way to regulate your business’s financial health and also regulate your cash flow control and cash position.
No matter what the root cause of your cashflow issue is, you need to find a way to cover immediate expenses quickly before the problem begins to spiral. There are actually a number of different options that you can consider in such circumstances.
Here are three cashflow solutions that you can consider in order to carry your business through your short-term crisis.
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1) Invoice Factoring
If you have noticed a pile of unpaid invoices beginning to stack up, you are not alone. Many businesses find themselves in a bind because their invoices are not being paid on time. You most likely rely on such payments being fulfilled in a timely manner in order to make your own necessary payments like payroll or insurance payments.
When such a situation occurs, one solution worth considering is invoice funding. Also known as invoice factoring, this is the process by which you sell those unpaid invoices for roughly 80% of their value to a lender. That lender then assumes the responsibility of tracking down and receiving payment of those invoices. Once an invoice is paid, you will receive the remaining 20% of its value. The lender will keep 1-4% as payment for the service.
2) Consistently Expensive Debt Payments
When a company has “expensive debt”, this generally means that the company is paying high interest rates on its debt. Your business might have several loans for which you make regular payments on time. However, if those payments include high interest rates, then that might be the source of your cashflow problems.
Your best course of action is to look into refinancing any loans that have such high interest rates attached. Your business might now have a better credit score than when you originally took out those loans, so you might qualify for a lower rate. Debt consolidation is also worth your consideration in such circumstances.
3) Poor Bookkeeping Practices
If you are wondering where your cashflow issues are even coming from, you might need to evaluate your bookkeeping practices. Although often seen as a tedious task that many entrepreneurs dread, it is one that needs to be done right. If you need to bring in an expert to clean up your bookkeeping, it is an investment that will pay off in the end.