How to Solve Short-term Cash Flow Issues Featured Image

At one point in their existence, every business faces cash-flow issues. These problems happen from time to time even to the best, since most companies don’t have steady revenue all year round. Although everything looks good on paper and the sales are higher than the last year, your suppliers are irritated and you’re always trying to catch up.

There are also unexpected costs and late payments from clients who are ruining the cash-flow even more. What can you do? Here are some tips to get you started on the right tracks.

Learn to be better at invoicing

When you’re unable to collect your invoices properly, you’re likely dealing with bad invoicing habits. If you improve your handling in this aspect it will, in turn, help you establish better relationships with your customers.

Invoices should be on time, predictable, and straightforward. They need to be sent out as soon as the work is done — never more than a couple of days after a project ends. In the invoice it should be outlined exactly:

  • When payment is due
  • How it should be paid
  • What the terms and conditions are

Ultimately, it should also possess a clear breakdown of expenses so that there are no misunderstandings about how the total number was calculated.

Take out a loan

Although planning is crucial when trying to resolve cash-flow issues, it requires a huge amount of time for it to be effective, sometimes you need a more imminent solution. When this happens, it can be beneficial to look into taking out a loan, which can give you the capacity to get cash flow problems under control.

For instance, you can take an online short term business loan that you will receive right away so that you can resolve your cash-flow issues. This is a more suitable option when you need small amounts of capital right away and plan to repay them in a few months top.

Be in good credit terms with suppliers and trade partners

Another instance that could help your cash-flow issues is to negotiate new or more favorable payment terms with your trade partners. Prolonging the time in which you need to pay a partner from due on receipt to do in 30–60 days will enable you to hold on to more cash for a longer period.

There is also the possibility of getting new, or prolonged, payment terms. Suppliers with whom you have a better payment history could be open about providing you with payment terms. When you have trader partners with 30-day terms and were consistent with payments, you can consider negotiating a 60 or even a 90-day payment schedule.

Managing inventory

Excess inventory is known to affect companies that manufacture products or re-sellers with warehouses brimming with goods. Too much made or purchased products just end up on shelves tying the cash-flow.

This can be resolved with fine-tuning your inventory so that you stock goods only for the smallest time possible before they’re sold or used in the manufacturing process. The amount of goods you store in stock depends on your sales expectations, volume, supplier capabilities, and available money. Track your inventory levels carefully — not having key goods is a sure way to lose customers. You can also try your luck with purchasing order financing in order to finance big sales that exceed your cash-flow capability.

Raising your prices

When most of us start running a business, we usually price our products or services on the low side in order to attract clients, or because we don’t realize what all expenses of running a business would be. Now, with plenty of clients coming in, this isn’t as profitable. You may discover that you have to work more during the week to complete all tasks, or that your expenses for raw materials and suppliers have increased.

A possible solution to this situation is to raise your prices. Operating a small company isn’t possible on small margins alone. If you raise your prices, there will be more cash coming in, which can smooth out slower or rougher periods.

In this post, we explored some top advice and techniques for fixing short-term cash-flow issues and getting a grasp on your company’s finances. Don’t be overwhelmed by the abundance of options. Select one or two you can implement and work from there.

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Ruhani Rabin being a tech and product evangelist for almost 20 years. He was VP, CPO for various digital companies. Plays with Drones in his free time.