Running a business is rewarding, primarily if you built it from the ground up and according to your unique vision. However, finding success and continuing to make it profitable can also be pretty difficult. Creating and continuing a sustainable business cash flow is incredibly important to keep your company afloat. Otherwise, you’ll embroil yourself in cash-flow tangles that can paralyze your business.
The good news is that these problems are easy to maneuver. By keeping aware of cash-flow issues and knowing how to solve them, you can make sure that your business stays liquid. Here are five common cash-flow problems and how to solve them:
Not Outsourcing Cash-Flow Tracking
Cash-flow is essential for businesses to thrive and survive. Having a smooth cash-flow allows you to pay your taxes on time, buy inventory, and cover other expenses necessary to run your business. If you’re a small business or a budding influencer, you might be looking for ways to economize pretty much everything. However, doing your cash-flow tracking can backfire on you.
Instead, outsource this task. You’ll entrust tedious accounting to qualified experts that will comprehensively assess your financial position and identify opportunities to save. Accountants are also trained to spot risks, which will save you a lot of time and money.
Overspending On Growth
Small businesses must thrive, and as an entrepreneur, you’ll probably be expanding your products or services and start new verticals. However, this will require a lot of investment in research and development—which is money that you sometimes don’t have.
Instead, take it slow. While creating new relationships and starting a buzz in your industry is exhilarating, it might tempt you to accelerate your operations before you’re even ready. Increasing your expenses on marketing and growth won’t always bring you profits, so be prudent with your cash and work on development only when you’re prepared.
Keeping a Poorly Performing Inventory
Storage costs stack up over time, so it’s essential to make sure you’re keeping only relevant and profitable inventory. However, many entrepreneurs make the mistake of ignoring unpopular stock, which quickly racks up more expenses than necessary.
To avoid this, review your inventory holding costs and determine what needs to go. There’s no point in holding onto inventory longer than necessary, so you’ll be freeing up valuable space while saving money.
Slowly Collecting Accounts Receivable
At first glance, this seems like a no-brainer. However, the slow collection of accounts receivable can manifest in many ways. For example, the person in charge of your accounts receivable might be inundated with other tasks. Perhaps you were too excited to sign a new client and allowed longer payment terms. Regardless of the reason, this can put a severe hamper of your business cash-flow and impede the payment of other vital expenses.
There are a few ways to solve this. One would be to hire an accounting professional. The other is to be a little stricter with your payment terms regardless of the situation. Letting your accounts receivable to dawdle will cause your cash-flow to suffer, so preventing this is essential to your business.
Holding Too Much Cash
Ironically, holding on to excessive amounts of money is bad for your business. While this ensures that you stay liquid, you can even miss out on several opportunities. For starters, funnel excess cash back into your business. Another issue is that your investors and shareholders might be suspicious of static surplus, which might make them lose trust in you.
While this problem can easily cripple your business, it is also easy to fix. Ensure that you’re liquid enough to keep you in a healthy financial position, then put the rest in your business. Whether it’s hiring more staff or upgrading your equipment, your business will grow from the investment.
Cash-flow problems can be tricky, as they often pop up when entrepreneurs least expect it. However, these can be solved by hiring a consultant or outsourcing tasks and leaving it to the professionals. By being aware of these problems, you’ll be well-prepared to prevent or tackle any cash-flow issues that come your way.
Looking for online accountants in Australia to help with your ecommerce business? Let The Ecommerce Accountant help! We are a team of accountants that have the business and financial expertise to help ecommerce businesses and influencers. Book a free strategy session with us today!