Growing businesses can find themselves strapped for cash. This is because expansion means rising costs in overhead, supplies, and payroll. 82% of business failures are caused by cash flow, so it’s important to trim down the unnecessary costs of business. Even running a lean operation, chances are that there are areas in the budget to reduce spending and increase your available working capital.
Accounting processes are necessary in every business. Tasks like credit risk management, receivables management, and accounts payable determine the financial health of the company. Accounting software makes it easier than ever in history to track spending and payments. Making payments to other businesses on-time or early can build business credit and open your small business to inexpensive financing options like bank loans.
Managing payroll each month, PTO, and providing services to your employees are all necessary to a strong business. Unfortunately, these administrative tasks can eat into your time and budget. Consider outsourcing HR duties to a third party to save on the time and financial expense an HR department would cost. Additionally, some HR companies offer benefits to your employees that you otherwise may not be able to provide as a small business.
Is your office space larger than you need? Many companies offer remote work to team members than can function outside the office space. This helps save on overhead costs that are unnecessary to operations. Assess the essentials your business needs for an office space and adjust your expenses accordingly.
Are there any programs or software that you are paying for that you do not utilize to the fullest? Consider trimming back on unnecessary technology. IT may sound great during the sales pitch to subscribe to a system that streamlines operations, but if you don’t train employees how to maximize the benefits of the system then it becomes an unnecessary expense. You must decide between investing time in training employees to use the technology or get rid of the technology.
Part of owning your own business means revisiting your business plan and budget. Is your company still on track to achieve your goals? Update your business plan and determine what is essential and what is non-essential to your company. Expanding into a new market is exciting, but is it a distraction to your core mission? Is the timing right for product expansion or are you chasing a passion project that is ultimately not adding value to your operations?
This is a difficult area to adjust. It is hard to disentangle emotions when it comes to downsizing personnel, but is it better to let one employee go or to hemorrhage your business finances until bankruptcy? Outsourcing tasks to freelancers or third party companies can ultimately save money for your business. Additionally, using a staffing company is a smart choice when adding employees. A temp gives you a trial period to see if the employee meshes with company culture and makes the best fit for the team.
Selling on credit terms can be harmful to a company’s cash flow. When it takes 30 to 60 to 90 days to receive payment for your goods or services, it can be difficult to maintain operation costs. This applies to your suppliers and vendors as well. Ask your vendors for a discount for early payment. Often suppliers will give a discount for quicker payment to improve their own cash flow.
Improving Cash Flow
Improving your own cash flow will reduce the stress on yourself and your team. Having the financial breathing room to focus on running your business can improve morale and productivity in the office. One way to improve your cash flow is through invoice factoring services from a factoring company. Eagle Business Credit offers cash flow improvement services by giving immediate payment on your open invoices. Freeing up your working capital means having the ability to offer early payment to your vendors, meeting payroll on time and every time, and having the freedom to streamline your processes with systems you can now afford.
A major time and financial resource drainer is accounts receivable management. Extending credit terms is necessary when selling to other businesses. Being careful about monitoring credit risks is an ongoing need. Having customers unable to pay for your goods or services can create a ripple effect and bring your own business down with them. Invoice factoring services that include free credit monitoring and professionals with decades of experience and advice can help mitigate credit risks in your portfolio.