When you are running a business, cash remains king. Your business needs an adequate amount of cash coming in to keep running. Without it, you are unable to pay bills or move on to the next phase. The more cash your company has, the better able it is to invest in itself and continue growing.
If cash flow problems plague your company, you are not stuck. There are several ways you can improve your cash flow issues. New Direction Capital can offer guidance and suggestions that help you business solve any issues and get on the path towards growth.
While no business owner has a crystal ball that can accurately predict the future, a forecast can act as a guide when it comes to figuring out what the cash flow for the company will be and for making appropriate adjustments based on reality. A cash flow forecast looks at both the amount of money you expect to see come into your company and the amount you expect to go out.
If your company is established, you can use historical figures to create a forecast. New businesses can look at industry trends to help them put one together.
Without a forecast, it is difficult to see where your company is struggling or to detect the source of any cash problems. If you are unsure how to go about creating a forecast, a virtual CFO can provide customized assistance, based on your company’s needs.
Look at Receivables
If your business anticipates receiving a certain amount of cash each month, but isn’t, one of the first places you may want to look for a discrepancy is in your accounts receivable. While in an ideal world, customers will pay on time, in reality, that isn’t always the case. An accounts receivable analysis can help you see which customers have paid, which are 30 days past due and which are more than 60 or even 90 days past due.
Your company may find that it has a number of bad debts, or customers who are very late in paying. There are several ways to reduce the chance of having bad debts in the future, including running a credit check on customers before agreeing to offer a product or service without upfront payment.
You may also decide to only work with customers who can pay with cash upfront or who pay with a credit card. Another way to encourage on-time or early payments, and to improve your cash flow, is to offer an incentive or discount to customers who pay early.
If your cash flow problems aren’t related to your customers, they may be connected to your company’s lack of profit. Even if your business has a steady stream of customers who pay in a timely fashion, a number of other financial considerations might be impacting the amount of money the business holds on to.
In many cases, businesses struggle with low profits because they don’t understand the financial big picture. It takes more than simply having a core customer base and doing good sales to be profitable. If you have money coming in, but it doesn’t stick around, New Direction Capital can help you figure out if a lack of profit is part of the problem and offer ways to help your company become more profitable.
Consider a Line of Credit
Your company’s cash might be locked up in a number of places, including accounts receivable and inventory. One option for freeing up some cash is to take out a line of credit or other type of financing. A line of credit can provide a bridge during those times when you need cash to pay your business’ bills, but are still waiting for clients to pay or have money locked up in unsold inventory.
At New Direction Capital, we have more than 20 years of experience helping companies conquer their cash flow problems. If your company struggles to pay bills each month or can’t figure out what the source of its money woes are, contact us today to learn more about how we can help.