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Best 9 Financial Tips to Save Your Company From Cash Flow Problems

  • By Jenna Gleespen
  • Sep 26, 2022
tips to save your company from cash flow problems

Any business can experience cash flow problems. It is one of the most common problems business owners face regardless of the size of the business. 

So, when you are experiencing the same issue, don’t be so worried. There are proactive solutions to always count on.

And in this article, we bring you some of those critical financial tips to save your company from cash flow problems.

Let’s get started.

1. Consult Business Specialists

Consulting business specialists is the first thing you can do to save your company from cash flow problems.

This might seem an obvious solution to count on, but believe it or not, many business owners are unwilling to acknowledge the importance of expert advice in creating a positive cash flow business plan. 

Business specialists, basically, help you identify the root cause of the problem for which your company might be on the verge of a cash flow crisis and develop a proven plan to improve the situation.

Tips to Save Your Company From Cash Flow Problems

They can also advise you on how to better manage your finances and make your business more efficient. 

For instance, Clarke Bell – a licensed insolvency practitioner and consultancy based in Manchester, UK – is an expert in helping companies manage their finances better, consolidate debt, raise additional funds, and much more.

You can choose to avail yourself of their services or another reputed company in your area to get out of your cash flow troubles.

They can quickly help you improve your company’s financial health and get you back on track.

2. Prepare a Cash Flow Forecast

In order to avoid cash flow crises, it is essential for businesses to prepare a cash flow forecast. Why so?

That’s because a forecast can help you predict the amount of cash you will need to have in order to meet your short-term financial obligations.

It can also assist you in identifying potential trouble areas so you can take preventative measures. Therefore, don’t underestimate the need for a cash flow forecast for your company.

Tips to Save Your Company From Cash Flow Problems

The first step in preparing your company’s cash flow forecast is understanding your business’s cash position. 

It includes a comprehensive analysis of a month’s total cash inflows and outflows statements, giving you a general idea of the amount of cash that goes in and out of your business every month on average.

That can give you an idea as to how much cash you need to have saved up for a rainy day. 

3. Expand the Accounts Payables

Expanding the accounts payables is another way to improve your business’s cash flow statements. It means you need to stretch out the timing to pay the unpaid invoices.

This may seem counterintuitive to save your company from cash flow problems, but it’s pretty effective.

Giving yourself extra time to pay invoices frees up cash flow that may be used for other things, like investing in crypto, new goods, or growing your business operations.

Tips to Save Your Company From Cash Flow Problems

However, it isn’t a long-term solution you can rely on, so you might give it a shot until you gain control over your company’s cash flow rate.

4. Reduce Company Expenses

Reducing company expenses is not always possible; many expenses are hard to do without. However, it can be reduced to the absolute minimum, significantly lowering your business’s negative cash flow rate.

For instance, you can take the following measures to reduce company expenses: 

  • Assess your current expenditures and identify areas where you may save money. This could involve cutting back on unnecessary luxuries or renegotiating contracts with suppliers.
  • Invest in energy-efficient technologies and equipment. This will help you save money on utilities and maintenance costs over time.
  • Automate all your invoicing processes. This will help you save on labor costs and increase efficiency and productivity.
  • Outsource non-essential functions to external service providers. By doing this, you can lower your overhead costs and focus on your core business operations.
  • Negotiate with your vendors to get the best price for goods and services. This could be an excellent method to save costs and raise your profit margin.

5. Raise Prices 

Of course, you don’t want to overcharge for your goods or make things expensive for your customers, especially those who have been loyal and long-term customers. 

But if you’ve been selling at heavily discounted prices, it’s time to start charging what your products are worth.

Tips to Save Your Company From Cash Flow Problems

A slight price increase can make a big difference in your bottom line, and it’s an easy way to improve your cash flow situation.

So if you’re struggling with negative cash flow, consider your prices and see if they could use a boost. A few extra dollars per product could make all the difference for your business. 

6. Access Business Loan

If your business is in a cash flow crunch, you may consider taking out a loan to cover expenses.

Taking on debt is a major decision, but in some cases, it can be the best way to keep your business afloat.

Tips to Save Your Company From Cash Flow Problems

Business loans can provide the funds you need to cover short-term expenses or make investments to help your business grow.

If you’re careful about choosing the right loan and managing your repayments, a business loan can be valuable for keeping your company afloat during tough times.

7. Have a Monthly Budget

If your business does not have a monthly budget, now is the time to start one. It’s because running a profitable business requires having a monthly budget.

A monthly budget helps businesses stay on track financially and makes it easier to respond to unexpected changes in the market or economy.

Tips to Save Your Company From Cash Flow Problems

This is especially important for small businesses because they are more likely to experience cash flow issues.

However, if you’re already operating on a tight budget, there are still ways to make ends meet. Look into government assistance programs or talk to a financial advisor like Clarke Bell about other options.

8. Improve Invoicing Process

There are many ways to streamline invoicing and improve collections, which can free up much-needed cash flow, such as, 

  • Waiting 30, 60, or even 90 days to send invoices is a common mistake that can severely hurt your cash flow. Instead, send invoices as soon as the job is finished.
  • Online invoicing software makes it easy to track payments and overdue invoices. Look for a solution that offers automatic reminders and late fees to help motivate customers to pay on time. 
  • Set up a system where invoices are generated and sent as soon as the work is completed. This will encourage customers to pay timely.
  • Also, offer discounts for early payment or set up a payment plan for customers who have trouble paying in full.
  • Invoices should be clear and concise, with no room for interpretation. Include the time of service, an outline of the tasks completed, and the total money payable.

Tips to Save Your Company From Cash Flow Problems

9. Upsell and Cross-sell

To stave off cash flow crises, you should focus on upsells and cross-sells. This means selling more expensive items to your regular customers and complementary products to them as well. 

For example, if you own a clothing store, you could upsell a customer on a new pair of shoes to go with their purchase. Or, if you own a restaurant, you could cross-sell a customer on a dessert to go with their meal.

Doing this can bring in additional revenue and help you remain cash flow positive. 

Final Words: Tips to Save Your Company From Cash Flow Problems

Addressing cash flow problems early allows you to take corrective measures in a timely manner. So, it’s critical that you analyze your company’s cash flow statements, set up tracking tools, and review the cash needs regularly to save your company from cash flow problems. 

In this article, we have tried to explain some proactive financial moves that Try to follow as many of them as you can; for instance, you should routinely check your company’s cash outflows so that you can devise a healthy cash flow plan.

FAQs

How Do You Solve a Cash Flow Crisis?

To fix a cash flow crisis, you must examine your expenditures and determine where you can scale back. You may need to make some tough choices, but it will help your business survive. 

Why Do Small Businesses Struggle with Cash Flow?

Small businesses often struggle with cash flow because they don’t have the same access to capital, a strong credit history, or collateral that large enterprises tend to have.

So, it becomes challenging for them to get loans or lines of credit. Additionally, another barrier is their shorter operating history, which predicting cash flow difficult. 

Why Is Cash Flow Important to a Company?

Proper cash flow management is critical to any business – large or small.

Without cash flow, a company cannot pay its bills, make payroll, restock inventories, or invest in new opportunities.

So, simply put, cash flow is the lifeblood of any business that needs to have positive inflows running all the time.

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Jenna Gleespen is a published author and copywriter specializing in personal and investment finance. Her expertise is in financial product reviews and stock market education.