What to do When Your Cash Flow Comes to a Halt
It’s difficult to operate your small business if cash flow is drying up. You may put off the inevitable by depleting your cash reserves or obtaining credit from your suppliers. However, eventually you may have to refuse a desirable order because you lack the supplies to fill it, your workforce may quit because you aren’t paying them on time, and your investors may start having second thoughts. If you find yourself wondering how to keep your business afloat, don’t panic – here are some tips to keep track of your cash and come up with a plan for lean times.
Know When a Cash Flow Problem is Coming
If you are aware that your cash flow is going to grind to a halt down the road, you have time to do something about it. This is why creating a financial forecast is vital. These are the steps involved in forecasting your cash flow.
• Look at your business history and estimate the number of sales you’re likely to get in the next month.
• Examine the same month in the prior year then factor in any changes you’ve made since then, e.g., promotions and/or business improvements.
• Work out when you’ll get payment for these estimated sales based on the average amount of time your invoices get paid.
• Determine your fixed and variable expenses and subtract this figure from your revenue to arrive at your forecasted cash flow.
For a small business with working capital issues, invoice factoring (accounts receivable factoring) may be the answer, and it’s possible to receive the funds within days. As invoice factoring doesn’t involve a loan, you won’t fall into debt, and you’ll have the cash you need to keep operations running.
Obtaining the Cash Flow Help You Need
Lack of cash flow doesn’t have to mean the end of your business. With forecasting, planning, and alternative funding options, you can successfully cope when there is a lull in business. Flipside Capital can help you with funding to keep your business operating smoothly. Please contact us for more information.