According to the Australian Securities and Investments Commission, the failure of more than 44% of small business last year was due to high cash use or inadequate cash flow. Maintaining a healthy cash flow is important for a business. Yet small businesses tend to have challenges with this mostly because they give out goods or services on credit and it takes them longer to collect money.
A poor cash flow can slow down the progression of your business. Financial stress can lead you to size down on employees, lose the trust of stock suppliers due to late payments and invest very little money in the growth of your business among other things. Luckily, you can take advantage of business cash flow loans to get out of a cash-flow trap.
Keep Check of Your Cash Flow by Making the Right Choices
The major culprits for cash flow decline are usually selling products at a loss and your expenditure being higher than your income. While you may find temporary relief in a cash flow loan when your business is struggling as long as you continue to sell at a loss you will have to keep borrowing to sustain your cash flow.
Invoice discounting is a form of lending that can help you with debt collection so that you don’t incur cash flow problems due to late payments. It is a debt finance method where you have the option of keeping your source of financing discreet from your customers. You will be in charge of collecting the invoices from clients as opposed to invoice factoring where the invoices and cash flow management is done on your behalf by the factor.
Encourage Repeat Customers
Having new customers is good for a business, but having repeat customers is an extra bonus. In fact, encouraging repeat customers is less challenging and less costly compared to scouting for new customers. All you need to do is keep your business running at all times even if you need to get a cash flow loan to counter any effects of cash flow difficulties.
Also, avoid hoarding stock since this will increase your storage needs while at the same time tie up your cash. It’s important to have a good balance between enough stock to handle your demand and excess stock that can negatively harm your cash flow. When you start taking business cash flow loans to meet certain demands yet you have excess stock in business, then you know you need to offer stock clearance sales.
Get the Right Finance Solution
When in a cash flow crisis, many businesses end up using the wrong products for cash flow management. A product like debt finance is, for instance, more desirable and benefiting to your business as opposed to a bank overdraft.