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For small businesses, running out of money can be catastrophic. A lack of understanding of cash flow and poor cash management is the most frequent reason for small business failure. In fact, a study by the US Bank found that 82% of businesses fail because of cash flow problems. Cash is king when it comes to the financial management of any business. Without cash, profits are meaningless. Are you also struggling with the question of how to manage cash flow for your small business?
If you can’t manage your cash flow within the first year, you will most likely not survive past the second year. There are many causes of cash flow issues. This may be caused by low profits, too much stock, stagnant inventory, seasonal demand or dismal debt collection. To help you avoid becoming another statistic, here are some smart tips to fix your business’ cash flow problems.
Say yes to technology
Fortunately, for startups and small businesses struggling to manage the cash flow, an increasing number of financial technology, or Fintech are entering the scene. There is an innovative range of digital software and tools that are not only helping SMEs keep cash flowing but also improving the quality and efficiency of day-to-day accounting and financial tasks.
There are several ways these innovative tools can help your business manage and improve cash flow, so you can start thinking less about surviving and more about thriving. Save your spreadsheets in the cloud sites such as Dropbox or OneDrive and make good use of accounting software, so you can easily stay on top of your cash flow wherever you are.
Besides that, utilize cash flow forecasts offered by modern payment solutions like Forwardly, to get an accurate picture of your past, present and future cash flow. This app estimates the money your business should expect to flow in and out, and see what your future cash position would look like, so you can make better financial decisions and plan for potential problems before they cause a cash crisis.
Improve your account receivable collection
Consistent late payments from customers are one of the common causes of cash flow problems. To avoid late payments, it’s vital to improve your cash flow by smartly managing your receivables. A good rule of thumb is to encourage customers to pay up faster with which you can take control and close the gap between invoicing and payment.
Try nudging your clients to pay up quicker. This can help you regain control and shrink the time between sending out invoices and getting paid. Oh, and here’s a pro tip: ditch the old-school payment methods like checks, regular ACH transfers or credit card payments. They can drag out the process, taking up to a whole week to clear payments!
Instead, think about embracing instant payments. They’re lightning-fast, processing payments in just 22 seconds. Making this switch can really streamline your accounts receivable process and give your cash flow a much-needed boost. With Forwardly, getting paid in seconds only costs 1% (minimum $1 and maximum $10 per transaction).
Here are our favorite techniques to speed up your invoicing:
- Invoice as early as possible and follow up immediately to guard against late payments
- Consider offering special discounts and deals to customers who pay their bills rapidly. You can give a 2 per cent discount if they pay within 30 days instead of 90.
- Keep invoice payment terms short and simple – let your customers know when you’re expecting your payment.
- Don’t feel bad about asking for payment – send a reminder a week before the due date and regular reminders until the invoices are paid.
- Keep your payment options as flexible as possible.
- From emails to Fax, SMS, and IVR reminders, use all means of communication.
- Keep the design of your invoices neat and clean – include important details, payment preferences and terms (with links if possible), easy-to-read content and so on.
Stop paying high fees for paying bills
Had enough of draining your wallet just to pay bills? It’s about time to find a smarter way. Seek out solutions without those annoying monthly subscription fees, allowing you to hold onto your cash longer. With Forwardly, enjoy free bill payments. Simplify your life by automating payments, creating a seamless and budget-friendly digital system. Delight your clients with timely payments while dodging late fees and lost checks.
Consider adequate small business financing
From increased interest rate to missed opportunities, poor relationship with supplies, stress, solvency and restricted growth, inadequate working capital can affect your small business in a variety of ways. Hence, it’s significant to have enough money to finance your business over a while.
Fortunately, there are different types of small business loans or financing options that can solve your cash flow crisis. Short-term financing such as a line of credit and long-term financing such as equipment funding and traditional bank loans can be used to make important purchases or to bridge the gap between payables and receivables.
Though the organic method is the best way to improve your cash flow i.e boosting revenue from sales and minimizing expenses using less cash. Sometimes, however, your business fails to make a positive cash flow even after giving your best. This is the time when you need to consider business funding to improve your cash position.
How we can help
Keeping your cash flow in check is crucial for handling uncertainties and driving your business forward. With Forwardly, you’ll get quicker payments and smoother vendor transactions, meaning no more waiting around for funds. Plus, you can save big on processing fees compared to credit cards. We’ll also take the hassle out of reconciliations and chasing payments, saving you time and stress. With our integration with top accounting software, managing your finances becomes easy. Let’s simplify your cash flow management and keep your business moving smoothly, together.
