Cash is the lifeblood of your small business. If you're suffering from cash flow problems, your business is in critical condition – and you may not realize it.
Even companies that are making sales and generating solid revenue sometimes fail as a result of issues with their cash management.
How do you know if your small business is bleeding money? What must you do to tend to your wounds and heal quickly?
Small businesses don't always operate with as much organization as large corporations do. Inefficiencies with cash management are sometimes so minor that you don't realize how they're hurting your business.
Nonetheless, they often lead to issues that have a far-reaching impact. As you might guess, cash flow problems are usually the result of management issues, and there are clear signs that indicate you're struggling in this area:
You're unable to file your taxes.
Few expenses are as great as your taxes. An obvious indication that you're struggling with your cash flow management is your inability to pay sales, payroll or income taxes on time. Due to the excessive costs of tax penalties, you'd be smart to pay your taxes on time and in full.
You have trouble meeting payroll.
Your second most important expense is payroll. If you're struggling to pay your employees, you need to address your cash flow problems quickly.
You're unable to meet payables in a timely manner.
If you've successfully covered your tax and payroll expenses but you're still having trouble paying your suppliers or vendors, you simply don't have enough cash to pay all of your expenses. Plus, many suppliers charge interest on late payments, which whittles away your profit.
You're building up credit card debt.
When you don't pay your suppliers, they may cut you off completely. That's why a number of small business owners turn to credit cards as an alternative to vendor debt. You might think that using credit cards is a short-term solution for getting the supplies you need in order to operate, but credit card interest is steep. This often becomes a deadly cycle that cuts into your bottom line significantly.
Some of your checks are bounced.
If you've started to see a trend in bounced checks, you're experiencing cash flow problems. Banks charge roughly $35 to $40 each time a check is bounced. While these costs may seem insignificant, fees like this start to pile up.
If you're struggling to come up with the cash to cover your expenses, you're in a stressful situation. But, sitting around worrying about it won't do any good. Here are five actions you must take to address your cash flow problems and protect your small business:
Remember, regardless of what revenue you're seeing, cash is what drives your small business and enables you to run a smooth operation. If you're bleeding cash due to a number of potential issues, you're not only losing money that could boost your bottom line, but you may be in danger of bleeding out entirely and having to file for bankruptcy.
Are you drowning in cash flow problems? Learn the tough questions you must ask in order to strengthen your business.