Even the most well-known companies can encounter cash flow issues from time to time. They are often caused by unexpected expenses, poor purchasing decisions, low sales, and unsustainable ongoing expenses. Regardless of the cause, you might be wondering how you can combat them to put your business in a better financial position. Take the following actions, and you might improve your business’s bottom line.
Hire a Fractional CFO
You may be asking, ‘What is a fractional CFO?’ and ‘Why would I need to hire one?’ However, when you have the answers, you’ll likely see why fractional CFOs, or chief financial officers, could be the answer to your company’s cash flow issues.
You might not have the funds or a need for a full-time CFO, but you could undoubtedly benefit from their expertise. In that case, you could hire a temporary or part-time CFO. Even on a limited budget, you can enjoy a range of CFO services, like identifying cash management issues, managing your financial reporting, and checking your financial systems for high expenses and low gross margins. CFOs can also suggest cost cuts to potentially put you in a better financial position.
Research Lines of Credit
Businesses won’t be flush with cash at all times of the month. Sometimes, you must pay your bills related to customer orders before your customers’ invoices are due. In that case, consider exploring lines of credit.
A line of credit is money you can spend during the business cycle that isn’t technically yours. However, you only have to pay back what you use plus interest, and it replenishes once you pay it back each month.
Negotiate With Suppliers
Most suppliers keep their customers on the same payment cycle for consistency. Generally, it’s every month, with invoices due by the 20th. However, such payment cycles don’t suit all businesses, especially if your customers pay you less often.
If you’re unable to change your own payment structure with your customers, consider whether you might be able to stretch out payables with your suppliers. Having more time to pay your suppliers might mean you can align your payments with when your own customers start paying you.
Reduce Your Expenses
Running a business can be expensive, and it’s not uncommon for outgoings to be nearly as much as income. However, reducing your expenses might be one way to combat that problem. At a minimum, look at subscriptions you can cancel and services you can downgrade. You might even consider exploring more affordable business premises.
Increase Your Prices
A great deal of market research is typically required for businesses to raise their prices. Not only do you have to consider your own overheads and expenses, but what customers are willing to pay and what your competitors charge.
If it has been some time since you raised your prices, and your business is experiencing cash flow issues, now might be the right time to start your research. A slight increase to keep in line with inflation and rising costs might be all it takes to see your business books back in the black.
Combatting cash flow issues can be stressful, and many business owners don’t know where to start. However, by taking some of the actions above, you might be in a strong position to improve your business’s financial health and get back on track.