Common Business Cash Flow Problems (And How to Avoid Them)


Cash flow problems can quickly become substantial for any small or medium-sized business or new startup. If you have a cash flow problem, you're spending more money than you're able to take in--and it doesn't take long before you find yourself struggling to pay your own bills. Identifying and fixing these common cash flow problems in your business makes it easier to balance your cash flow and operate your business more successfully.

Problem #1: Failing to Get Invoices Paid

When you send out an invoice, how long do your customers have to pay it? If you have an ongoing relationship with a specific customer, do you continue to provide services or deliveries when they haven't paid for their last service? Growing and larger businesses, in particular, need to automate invoicing services. Automation can handle everything from issuing reminders to customers who are late paying to stopping shipments or services if customers aren't caught up on their bills. It can also be helpful to institute a late charge if, for example, an invoice isn't paid within 30 days of being issued.

Problem #2: Your Books are a Mess

Messy books can make it difficult to tell which customers have paid, which bills you've paid, and which bills are still pending. This can lead to late payments, lost customer invoices, and a host of other potential problems that can slow your cash flow into a trickle. If you're struggling with messy books, working with an outsourced bookkeeper can help clean things up and ensure that you know where your money is going--not to mention, prevent you from missing out on potential income.

Problem #3: Busy Seasons Versus Slow Seasons

Some businesses are simply seasonal in nature, whether you're a retail company that has a huge amount of income at the end of the year or a construction company that sees more work during certain seasons than others. As your business grows, those slow seasons may become even more pronounced as you struggle to pay your employees or to find the right cash flow balance. While you can't always prevent slow seasons, you can prepare for them. Work with an accountant to discover how to balance your cash flow throughout the year, even if you have some seasons that are significantly busier than others.

Problem #4: Growing Too Fast

When your business makes the jump from small to medium or you've made a recent change within your business structure, keeping up with cash flow can be a serious problem. Instead of struggling during times of rapid growth, make sure you have the financial plans in place to keep your business moving smoothly. Short-term business loans, for example, can provide you with the ability to add temporary or permanent staff to tackle a big project. Make sure, however, that the cash flow from those jobs will ultimately support that increased cost.

Problem #5: Lack of Profit

One of the biggest cash flow problems faced by many businesses is simply a lack of profit. Expenses are up, sales are down, and it doesn't take long for your business to be in trouble. If you're seeing a lack of profit, it's critical to identify what's causing it. Have expenses increased unexpectedly? Is a specific product or service just not selling? By identifying the reason behind the lack of profit, you can more effectively address any issues associated with it and move forward to future growth.Do you need help managing the cash flow in your business? If you've been struggling to keep up with your cash flow or left confused by common cash flow problems, contact us today to learn more about the services we provide and how we can help you manage your business cash flow.