A recent study by U.S. Bank showed that 82% of small business and startup failures were due to cash flow issues. Many times, advance planning can help alleviate these problems. Two impactful solutions include:
Automated invoicing tools often make sense for the smallest of companies, because they can help track outstanding invoices effectively. This inexpensive platform can save you a lot of time and help expedite payments with automatic reminders and instant delivery. Record keeping is also easier to manage with everything stored in one online location. You can pull data to compare revenue and expenses or look at client payment trends. When tax season arrives, you’ll be well prepared with information for your tax professional.
Hire someone to keep accurate books and generate meticulous financial statements and reports, then read them regularly. Monitoring everything from expenses, income, inventory, overhead costs, sales, profit margins, debt reduction and more is critical. With the big picture in focus you will be able to better forecast sales in order to capitalize on them, plan inventory efficiently and target resources.
Finally, build a cash reserve with money saved through increased efficiencies. Having three or more months operating expenses available will help prevent you from running up debt when cash flow is limited.