Cash Flow Basics: 3 Ways to Fix Cash Flow Problems

Are you having trouble with cash flow? . Cash flow problems affect most small businesses at some point, but you don’t have to let it ruin you. Here are nine things you can do to keep your cash flow in the positive.

Operating your own business had many challenges but when you are working 14 hours a day and it seems like you are just not keeping up with the business operating expenses, you need to stop and examine your cash flow. Your business should cash in the bank to cover 3-6 months of the operating expenses.

Cash flow is a problem that plagues every small business from time to time. On paper you look like you’re doing OK. Your sales are higher than last year, and your expenses haven’t increased much. Things look like you should be making a profit. But your creditors are breathing down your neck and you’re always playing catch up. What can you dot? Here are some tips to get you moving in the right direction.
Get Invoices Out Promptly

If you invoice clients, you’re not going to get paid until you send out the invoices. If you send out all your invoices on the 28th of the month, and your customers pay their bills around the 25th of the month, you’ll have to wait 30 days  - or longer, perhaps - before they pay you. Speed up cash flow by sending out invoices as soon as you ship products or complete a job.

Raise Your Prices

When you started your business you may have priced your products or services on the low side as a way to attract customers, or because you didn’t realize what all your costs of doing business would be. Now, you may have plenty of work coming in, but it may not be profitable. You may find that you have to work 80 hours a week to get the work done, or that your costs for supplies or raw materials have increased.

If you are in a situation like this, or if you are still charging the same prices you did 4 or 5 years ago, raise your prices You can’t operate a small business on razor-thin margins. By raising your prices, you’ll have more cash coming in, which can help tide you over slow periods or times when customers pay late.

Blame it on your accountant

Some clients, particularly those who were your first clients, may get annoyed when you announce you are raising your prices. They may believe you “owe them” for “helping you get your start,” and that your price increase is a betrayal. If the customer is one you want to keep, the way to de-fuse the situation is to take the personal element out of it. Instead of arguing about why you decided to increase your prices, sympathize with client and then attribute the decision to your accountant. You might say, for example, “You know, John, I really didn’t want to raise my prices. But my accountant said I had no choice.”


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