How to prevent cash-flow shortfalls in your business

Facebooktwittergoogle_plusredditpinterestlinkedinmailby featherCash-flow shortfalls can strangle your businesses growth, and getting out of the shortfall hole is very challenging. Some businesses that have excessive demand for their products or services still end up going out of business due to cash-flow shortfalls that are so significant that vendors discontinue providing services to them, making the business unable to deliver more product to their customers. Manufacturing businesses are prime examples of where a business can have a great product market fit, solid sales and still be strangled by cash flow shortages. Investment in the products being manufactured occurs well in advance of when the products are sold, which often ties up cash for months. Then, if customers pay 60 days after the sale, it can be 6 months, or more, between outlay of cash and collection. If properly planned out, it can be managed. Once you get in the cash-flow shortfall, it can be a viscous cycle and difficult to dig out. Companies can dig overcome shortfalls, but need to streamline accounting operations, extend payment terms with current vendors and attempt to accelerate customer payments in order to survive. KBS has helped many businesses to both avoid ever getting into these predicaments and also successfully dig out. Creating a scalable accounting and business infrastructure may seem unrelated to cash flow management, but the two are closely related. Follow these tips to help reduce the likelihood of a cash-flow shortfall in your business:Obtain and use a business credit card.Pay vendors for business expenses, when feasible, using a business credit card that allows payments to be deferred 30 days.Accept multiple methods of payment.Offering payment by credit card, PayPal, ACH, and even wire transfer can encourage timely payment of balances due to your business. Make it easy for your clients to pay you.Always ask for extended payment terms.Ask for payment terms of 30 days or more when working with vendors. If that’s not possible, make sure your customers are limited to a similarly brief payment window.Seek credit before an emergency happens.When cash is plentiful, contact your banker to obtain a line of credit. It’s very difficult to get a line of credit when you are in dire need of one. With careful, frequent monitoring, managing your business cash flow will become a habit as natural as brushing your teeth!Facebooktwittergoogle_plusredditpinterestlinkedinmailby feather