Cash flow issues are stressful for small business owners and can put the business in a very tough spot, or out of business completely. A U.S. Bank study revealed that 82 percent of business failures are due to poor cash management. How can small business owners protect themselves from cash flow issues? Read on for tips from our chat, and check out the full chat transcript here.
Q1: What are some of the causes for cash flow issues in #smallbiz?
Your business can be the best in the world, but it won’t survive long if there are cash flow issues. There are numerous reasons for cash flow issues, including mismanagement of expenses, invoices, and payroll; late customer payments; and disorganization of the company’s books. @BizBooksCloud, @accountingpeace, @CathyIconis, @jazfun, @SherrellTMartin, @alisonatintuit, @vheckman, @ledgerdocs, @mb_bossman, and @getclockshark offered other causes:
- Overbuying equipment and supplies is a big one
- So are slow collections and owner draw/distributions out of line with profits
- Having to pay taxes!
- Money leaks such as subscriptions and bank fees
- Not setting the best payment terms for their business.
- Overestimating future sales volumes, Being passive about past-due receivables & Not using a cash-flow budget
- Managing your business by the money in your bank! (a no-no-no!)
- Not knowing who owes you $$
- Not knowing the health of their business in real-time. Relying too much on history instead of the here-and-now.
- Not managing credit card purchases well.
- Taking on work with poor (or negative profit margins)
- Connect and use the bank feed at least once a week!
Q2: What are some basic steps to get your #smallbiz organized to guard against cash flow issues?
Keeping your small business organized is key when guarding against cash flow issues as disorganized books can quickly get out of hand. To help with organization, you can hire an accounting pro, budget, review A/R consistently and regularly, invoice in a timely manner, get rid of stale inventory, work with a tax professional to submit taxes throughout the year, review trends and prepare accordingly, analyze expenses to ensure you aren’t paying for services that are no longer used, and search for apps that can help such as:
- @fundera to find and apply for small business loans
- @getclockshark or @tsheets for time tracking and payroll ease
- @liveplan to forecast any potential cash flow issues
Here are a few other tips from the chat:
@BizBooksCloud: One thing I insist on is a separate payroll account with total payroll burden deposited each payday and left alone
@CathyIconis: And when you look at the bank feed, update it, and still see a big difference between QBO and the bank – investigate
@mb_bossman: Get creative, & change pricing structure to a recurring model.
@vheckman: In QBO, Gear> All Lists & check out your terms. Set/ change terms to get paid quicker! Can set discounts for early payments
@ledgerdocs: Secure credit before you need it, Find your ideal dashboard (#QuickBooks Online) & Know when to say no
@vrcqbpro: the QB Payments feature in QBO makes collecting on your invoices really easy.
@mb_bossman: Don’t pay off expenses faster than they are due, if it will inhibit needed cash flow.
@SherrellTMartin: Stop co-mingling personal expenses into the business cash
@CathyIconis: Don’t invest too much into future operations. Set up a way to scale successfully.
@AmyisanAggie: Adopt the mantra: “Stay in front of the numbers instead of reacting to them.” Update books at least once a week.
@vheckman: Be selective on when to subscribe monthly vs. annually. Annual can have discounts, but often ties up a lot of money at once.
Q3: What are some things you can do to increase your revenue in your #smallbiz?
There are numerous ways small businesses can increase revenue, including raising prices, increasing the number of customers, and increasing the average transaction. One item that was mentioned repeatedly during the chat is for small businesses to sell more to current customers by looking at what else can be sold to them – new services, expanded services, existing services, etc.
Thanks to @alisonatintuit, @BizBooksCloud, @CathyIconis, @mb_bossman, @vrcqbpro, @vheckman, @8Pillars4Growth, @SherrellTMartin, @ledgerdocs, @getclockshark, and @Kimtuitive for these additional strategies:
- Raise your prices! (and no, I am not being a smart-aleck)
- One answer already given is a sale on stale inventory
- Take a proactive look at your pricing and make sure you have a sustainable business model.
- Blog about it. Produce content regularly that helps your target audience, then sell ad space to sponsors. Traffic=$$
- Increase your marketing to existing customers
- Selective advertising to your specific target audience
- Setup a business model to allow for repeat customers. Do you have a Small, Medium, and Large option?
- People can sell more services to existing – cheaper than acquiring new clients!
- Referral program for existing customers
- Find ways to add-on high-margin services/ products
- Review Your Pricing Strategies, Diversify Your Offerings & Develop Relationships using online chat communities such as
- Invest in tools that will help you grow. $ spent now could mean $$$ later on. Don’t sharpen your axe, buy a chainsaw.
- Add advisory services offerings on top of compliance work. Clients don’t know what you can do for them until you tell them!
- Be transparent about ALL the services you can offer! I love when biz (including firms) have a menu on their site!
- Don’t ever discount. The revenue lost is far more than your actual discount offered (and it undermines your value)
Q4: What are some things you can do to decrease your expenses in your #smallbiz?
Another way to increase revenue is to decrease expenses. Small businesses should review everything from early payment discounts when paying bills, to negotiable interest rates and service provider fees. A popular example from our chatters was office supplies. Keep a close eye on what is being ordered/purchased, but isn’t necessarily being used a.k.a. cut the excess. Other ideas:
@BizBooksCloud: Take a hard look at each expense and cash outflow category and think about how to reduce it
@CathyIconis: Sometimes people would rather buy something than spend more time on marketing. Get your head back in the game. #guilty
@alisonatintuit: Look at your telecoms and internet costs. See if you can get a better deal by switching plans or providers
@vheckman: Leverage free/low-cost ways to get exposure such as attending events, speaking at events, writing articles/ blogs, social media
@alisonatintuit: I know some accts who reduce their PENS budget by going to free tradeshows and picking them up from vendors
@SherrellTMartin: Use echeck and ACH payments to receive payments vs credit cards it’s 0.50!
@BizBooksCloud: Another one that decreases office supply costs but even more on labor costs is to go paperless
@mb_bossman: Just recently stopped accepting CC’s unless I’m passing cc fees on to client.
@8Pillars4Growth: Schedule time to review expense reports. Cut out bloat.
@AmyisanAggie: Monitor credit card charges made by employees w/ company cards.
@vrcqbpro: Compare your expense ratios against industry standards to see where you may be paying too much.
Q5: What apps can #smallbiz use to help fight cash flow issues? And what do they do?
The old saying is “there’s an app for that” and there are numerous apps for productivity that can help small businesses fight cash flow issues, including:
- @liveplan, @fathom, @Billcom Anything that can help plan better.
- @Fundera – Such a great app for finding small biz financing.
- @liveplan to help monitor metrics and cash flow
- @tsheets – Implement time-tracking w/ the ability to alert you if employees are close to OT/ prevent padding the clock
- @fundinggates to help with collections of the o/s AR.
- You & your customer know if their bill is not paid on time automatically! Love apps u can set & forget!
- In conjunction with #qbpayments Set it and forget it!
- Get #QuickBooks Online & use the @IntuitApps store to find the likes of @ledgerdocs to help #smallbusiness
Want more #QBOchat info? Head over to Facebook and check out the new #QBOchat group. Join us for the next #QBOchat, Thursday at 3 PM EST/12 PM PST.