All companies face financial obstacles, regardless of the size of the company or how long it has existed. The difference between successful businesses and those that must close far sooner than intended often comes down to the management of the financial obstacles. Rather than ignore the possibility of experiencing them, successful companies anticipate certain situations and plan for how to overcome them in advance. Below are four common financial obstacles that most businesses face at some point.
Cash Flow Crisis
Cash flow refers to the amount of money a business has on hand or assets it could quickly convert to cash to make a purchase or handle an emergency. A business can have thousands of assets on paper and still fail due to inadequate cash flow. If your company struggles with cash flow like so many others, consider speaking to those you have outstanding invoices with to see if you can renegotiate due dates. At the same time, give your customers notice that you intend to change their due dates to receive payment of outstanding invoices sooner.
Offering customers automated payments from a bank account or credit card is a very effective way to receive timely payment. You might also consider offering more payment options such as all major credit cards, PayPal, or Apple Pay. Providing discounts to customers who pay early and penalizing those who pay late can also help to improve cash flow.
Online marketing through traditional channels is often too expensive and too competitive to benefit small businesses. However, that doesn’t mean they should abandon marketing efforts altogether. A better idea is to consider low cost and effective types of marketing such as providing valuable content for website visitors. How-to videos, blog posts, and eBooks are just some examples of content that doesn’t take a lot of time to create but can yield big results at the same time. People who come to your website regularly for information just might turn into your best conversions.
Not Setting Money Aside for Unplanned Expenses
While no business owner expects to be a victim of theft, fire, flood, or compromised data, these situations happen all the time. You could quickly find yourself struggling to pay the most basic expenses if you don’t have an emergency fund to turn to when the unexpected or unthinkable happens.
To overcome this financial obstacle, plan to budget for unplanned expenses each quarter. Just be sure to resist the urge to spend the money if your company doesn’t end up needing it then. The more you add to an emergency fund, the less of a financial impact an unexpected situation will have on your business.
Lack of Adequate Working Capital
While your business needs healthy cash flow to pay everyday expenses, it also requires a decent amount of working capital to invest and expand the company. It gives you the funds necessary to hire more employees, buy another location, relocate, purchase larger equipment, and much more.
Unfortunately, it can be hard to get working capital when you need it. This is especially true if your company has poor credit or lack of a credit history. It’s always a good idea to know your business credit score and do whatever you can to improve it. This greatly improves your chances of approval when you do need a working capital loan.
Need More Solutions to Your Financial Obstacles?
The above are just four common problems faced by most businesses at some point. Perhaps you have different issues or would like to discuss solutions to the above in greater detail. Whatever your situation, we’re happy to help at Rickhoff & Associates. We invite you to contact us to learn more about our business solutions today.