cash flow written out

Cash really IS king.

This is one of the most important lessons entrepreneurs learn – and many learn it the hard way. Simply put, it doesn’t matter how much money is coming in the future if you don’t have enough money to pay your bills today. Employees want their paychecks, landlords want their rent and suppliers want to be paid.

Real-life situations that cause cash flow problems often look like this:

  • You buy inventory today which you plan on selling over the next several months.
  • You pay your work force today but can’t invoice until the job is completed.
  • You invoice a client with terms of Net 60 but have to pay for materials with terms of Net 30.

Any of the above circumstances creates a timing difference between your cash in and your cash out.

Cash flow issues can cripple your company and even put the future of your business at risk. In fact, a U.S. Bank study found that 82% of small business failures are attributed to poor cash flow management. LINK:

So how do you alleviate cash flow issues? Here are six ideas to consider:

Get a working capital line of credit.

If you have been in business profitably for two or more years and have a strong balance sheet, you can apply for a working capital line of credit. This type of loan is specifically designed to help companies avoid a cash flow crisis.

Encourage credit card payments.

Yes, credit card providers charge a service fee of 3%. But it may be worth it if you can shorten your collection cycle.

Offer early payment terms such as 2% Net 10.

Think of it as an incentive, not a discount. Remember, it’s all about converting your accounts receivable to cash sooner rather than later.

Consider 0% interest credit cards.

If your business and personal credit scores are good, you should be able to obtain a 0% credit card. This is a short-term solution that can provide some relief in a pinch.

Traditional credit cards

These are always an option.

Look into a Kabbage loan as a last resort.

If you decide to look for financing in what is known as the secondary market, expect exorbitant interest rates with quick paybacks.

Managing cash flow is one of the most common challenges small businesses encounter. Putting some combination of these six strategies in place will provide access to the working capital you need – when you need it – to bridge the gap between cash in and cash out.

If cash flow issues are preventing you from growing your business, I’m here to help.