The financial health of your small business is greatly affected by cash flow – and by cash flow problems. And the increase in digital transactions and diverse payment methods makes managing that cash flow more and more tedious.
Identifying cash flow problems and their solutions is a difficult, but necessary, part of owning and running a small business. To help keep you in the loop about your business cash flow, here are some common problems and tips to identify and solve them.
Start with an Audit
Cash flow problems can stem from several different sources. When you are seeing your cash flow decrease, it’s important to get to the source of the issue.
Big cash flow problems can stem from things like increased expenses or a decrease in revenue. Many small businesses are experiencing supply chain shortages or finding that the cost of materials has risen due to the pandemic and the proceeding inflation.
The quickest way to find the cash flow problem is to thoroughly audit your general ledger and balance sheet.
Review AP & AR Frequently
While monthly reviews of your accounts receivable and accounts payable are often standard for businesses, try increasing the frequency to help stem the tide of cash flow problems.
The payment solutions you could implement include things like not paying your AP early, unless there is an incentive or discount for doing so. You can also send weekly follow-ups for accounts receivable – you can capture a lot of missed or delayed revenue here because, like you, many people are juggling several different bills and responsibilities for professional and personal reasons, and sometimes all it takes is a small reminder to influence a client or customer to settle their outstanding accounts with your business.
You should also get in the habit of (if possible) asking for updates from clients on when you should expect payment. Creating and maintaining channels of communication with your patrons and customers can often alleviate financial issues before they’re stretched out across weeks or months.
Often, a missed payment is a simple oversight or mistake, and that reminder can be very powerful, so can setting or requesting a deadline. By managing those expectations early, you not only avoid conflict, but you give the person who owes you the benefit of the doubt, and a due date.
These small, frequent actions can help positively affect your small business’s cash flow.
Review the Value of Your Products & Services
Digital trends shape how we shop, travel, consume content, and so much more. And these trends change rapidly, which means a product or service that was your best-selling asset three months ago could now be your least popular.
Because of the rise of inflation and other economic issues that stem from pandemic-era issues, it’s important to keep your cash flow problems from being tied up in unwanted or immovable inventory or service packages.
As much as we don’t want to reinvent our business structure every few years, it’s still critical that you are evaluating what is and isn’t working for your business. When you look at your products and services, you have to do so impartially. The history of their performance is important but should only be part of a multi-faceted review to ensure that you aren’t saving time and space for offerings that were huge revenue makers a few years ago, but haven’t shown much promise since.
Take a More Integrated Approach to Your Payment Solutions
Just like it’s important to audit your subscriptions (size, package, frequency, etc.) for your business, it’s also good to see what your payment solutions are costing you.
Many popular payment systems, apps, and other vendor spaces where small businesses reach their audiences have increased the fees associated with doing business on those platforms. And paying 3-8% in fees across a dozen, or even just a handful, of different payment platforms and apps can add up.
Preferred payment solutions are diverse – some of your clients will want to send a check, while others will prefer ACH transactions, credit cards, recurring billing, or even cryptocurrency. And this can create big cash flow problems.
ReliaFund offers integrated payment solutions so you can provide comprehensive options and continue to get paid on time and in full, thus keeping your small business’s cash flow problems to a minimum. It also allows you to keep all your payment information and transactions in one place.
Our payment processing platform can help you reconcile and record your transactions, compile reports for all recurring payments and more, as well as process sales, credit authorizations, returns, and voids.
ReliaFund is the single solution for accepting all types of payments. If you have questions, please contact us with questions or get a payments analysis from our financial experts today.