It is a universal fact that cash is king. For small business owners, cash also means the difference between failure and success. As per a recent study, 82% of the total small businesses fail because of poor cash management. Small business owners are constantly seeking information about how to manage cash flows in a better way.
During cash crunches, it can be a vigorous task for small businesses such as home repair, cleaning, landscapers and pools to cope up with required operating expenses. Cash crunch can also tighten the situation for a small business to market new customers, buy supplies and equipment and repair vehicles.
There are many reasons why small businesses are susceptible to cash crunch problems:
- Customers don’t make their payments on time. Around 64% of small and medium business owners deal with clients who make late payments.
- Projects generally require an upfront investment which creates a gap between revenue and the cost
- Unpredictable expenses including accidents during the job, replacement of equipment, repair of equipment and etc. are common.
- Unexpected changes in the weather affect small businesses very often
- Stiff competition also plays a key role
The best way to deal with cash flow imbalance is to predict cash flow and be ready for it. Small business owners take different steps to solve the imbalance in cash flows.
Some of the small business owners make sure that their invoices are paid by the customers on time so that there is no balance. Many small business owners make sure that they have enough cash flow so as to avoid a situation. Do you want to manage the cash flow for your small business?
Here is a list of common things that you should keep in mind:
- Always make sure that your clients are making payments on time
- Send them regular reminders till the deadline given to them
- Set up your business financing even before it is required. Don’t wait for a cash crunch situation, instead, apply for a line of credit or any other suitable business loan.
- See what business funding options are available in the market and fund them as per your requirement
- Small business owners can also compare various funding options from the line of credit, merchant cash advance, invoice financing, and invoice factoring
- Instead of guesswork, actually, calculate the cash flow and measure how much cash would be required for the management of your small business
Managing cash flow for your home business services can be a difficult task if you are not prepared. Keep the data ready about available small business funding options instead of getting surprised due to last minute cash crunch situations.