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How to Avoid Cash Flow Problems With Your Small Business

CASH-FLOW-PROBLEMS.jpgA business is a constant combination of tough decisions made on shaky ground. Studies have shown that around 50 percent of businesses ultimately meet an end before they've reached their prime. It isn't all bad, of course. With the right decisions, attitude, and practices, many businesses manage to stay afloat (there's another side to that 50 percent, after all).

Even with all the precautions in the world there may come a time when you need a little help. Thankfully, some advice comes free! There are ways to avoid detrimental cash flow problems in your business, including:

Paperwork

There aren't many people who enjoy paperwork. Regular record keeping is a solid way to assure that your finances are in order, that everything is running correctly, and that you are mindful of your spending. It helps to keep every business related receipt, invoice, and loan in a finance folder. Check the folder nightly to assure proper spending and money management.

Understand Your Customers

Do your customers vacation during the holidays? Do they disappear for Spring Break, hide away for the month of April (the dreaded tax day), and stop spending around a specific point? Knowing your clients puts you in the position to stock up for cash flow dry spells. During the times when you are facing a cash deficit, you can have money saved up and ready to get you through to better times.

Avoid Bad Debts

When a client is late to pay, you can find yourself in hot water. Always pursue late invoices to assure they don't turn into bad debts. Have a system in place (contracts stating strict guidelines that you both sign off on) to inspire your clients to keep their word and send their checks at the right time. Times can get hard, yes, but you have to maintain a business. Be sure to have reminders set up and a determined late date to deter bad debts.

Spread Out Payments

What client wouldn't love to hear that they can pay less, spread further in the future? A good way to keep from slipping into holiday/seasonal gaps is to give varied payment options that cover these times. Don't short yourself, of course; assure that the payments are at least sizable enough to enable you to save and spend as you need for your business.

Have a Back Up Plan

When things just aren't going as they should, a plan to survive the tough times will help tremendously. Things like factoring can assist when an unexpected lull in cash flow hits, giving you money that won't lead to bad debts or terrible interest rates.

There are a number of other ways to keep your cash flow healthy and thriving, but the main point is to pay attention and save, save, save. Your business will see better days as long as you are willing to put in the hard work necessary to keep a watchful eye on its driving force: capital.

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