7 Strategies to Fix Cash Flow Issues

Often times a lot of businesses and start-ups struggle early on with their cash flow issues. They sometimes have issues with collection, taxation and payment. They drive their sales team to work twice as hard, and simultaneously focus on making the product better.

But what they tend to forget is profitability.

Profitability solves critical cash flow issues that may arise 6 months from now. Brands that can take advantage of that can plan months in advance, incase something bad happens.

There are several months where the sales numbers go through the roof, and other times they crash hard. Knowing fully well, how you are going to structure a deal, negotiate expenses and focus on cash influx is going to help you prepare for cash flow issues.

You need to get to the root cause of your business problem, as that is where the major chunk of the problem lies.

Do you have enough customers?

Does your finance department understand inflation?

Do you have enough margins to sustain the business long term?

These and many more questions must be answered from the get go, before committing to a specific cash flow mechanism. There are some great ways that you can fix your cash flow issues that don’t involve any drastic changes to your current business model.

#1 Sales Problems – There could be underlying issues with sales in your company. You’d have to research within the brand to figure out the real culprit, but most of the time its sales. When you aren’t really selling all that you should be, you’re in trouble. When you focus a lot of time and effort on a product that looks great and feels great, you need to also spend time on the sales part.  Either the price is too high, or your targeting has become way off! Whatever the case may be, sales has to be the first thing you review.

#2 Inflated Expenses – You need to have a healthy outlook towards what you’re spending and how you’re spending it. If you’re reckless and spending on everything you need to build the product, then you should switch focus towards launching an MVP instead. Investors get easily miffed if your business strategy hasn’t proven successful after years of no profitability. You need to ensure that you can create deeper margins by cutting expenses where needed.

#3 Poor collection efforts – Probably one of the rarer occurrences, but it still happens – collection is sometimes just not done. There are invoices pending, and because there is no single department for collection and payments, nothing gets done. There are no mapping systems and processes that allow for companies to take control over their expenses – leading to a lack of structure which creates flaws in cash flow. All calculations go out the window when you haven’t even collected what you’re owed. Unpaid invoices can literally break your company if you’re not careful enough with your expenses.

7 steps for fixing a cash flow problem

After having a decent bit of idea around what can cause a cash flow problem, you must start to focus on the things you can do to fix the problem. You have cash flow problems, now its time to fix them! You need your business to stay afloat if you ever want to see a dime put back into your business. Here are 7 steps to actually the fixing the problem that’s been created –

#1 Run a flash sale

If profitability “now” is your mantra then there is nothing better than a flash sale. You can easily get rid of all old inventory or product base that’s been lying there and get a fresh influx of cash that can get you going. You can take advantage of any of the holiday seasons, or get crafty and invite a select few to buy the products. It’s the simplest way to get out of a rough patch and you need to do this now!

#2 Raise prices

This may seem counterintuitive, but one of the ways in which you can get out of a struggle is raising prices slightly for happy customers. If you know that they’re not going to go to a competitor you can raise prices for them to create better profitability. You can even try upselling to them, to create new channels of income that were previously unexplored.

#3 Line of credit

If it’s a genuine problem and cash flows will resume later in the year, then tapping into a credit line could be a good idea. You can take out a loan or borrow money from relatives to ensure that your business keeps going. Lots of successful entrepreneurs have done this when times were tough, and they’ve learned valuable lessons on the way there.

#4 Work on retainer

Businesses that run on retainers tend to have profitability throughout the year. Owning to the fact that the retention fees offset any of the problems with volatility, working on retainers is a great idea for service businesses.

#5 Better invoicing

You can either introduce an automated system for invoicing or hire a temp to do that job for you. When all invoices are processed on time, you can be relieved to know that money is entering your account every month. Otherwise, delays can create massive backlogs.

#6 Negotiate with creditors

This is a last resort sort of solution, but one that has been practised for generations. If you have a great relationship with creditors, then negotiating with them could be a good idea. You can take some time off and rework some deals simultaneously.

#7 Hire better people

Hiring better people to manage your money problems is a good idea, as it’s the perfect indicator that things need to go right. Sales, product development and operations are the three pillars of any good company – and you need to hire the right staff to fix any problems.

Conclusion

You can’t afford to sit idle and let time fly while you wait for cash. You need to take action and not let procrastination or a lack of motivation to take over your business. Greatness is built one step at a time, so take action now!