More Than Finances

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How to Deal with a Small Business Cash Flow Nightmare

Maintaining healthy cash flow is an important aspect of managing any small business, as a lack of available capital can quickly lead to financial problems. Unfortunately, most small businesses that fail wind up going out of business simply because they couldn’t afford to continue due to excessive overhead costs. Furthermore, insufficient cash flow can prevent a company from expanding and scaling at an ideal rate, which can lead to stagnancy and less-than-optimal profitability. With that said, here are a few steps you can take to wake your business up from a cash flow nightmare:

1. Seek External Funding

Perhaps the quickest and easiest way to overcome cash flow woes is to obtain financing from a third-party lender. If your credit is decent and you can provide proof that you’re earning a decent amount of revenue, you could probably get approved for one or more business loans within a matter of days. You can try expedited loan services like Lending Express or try your hand on peer-to-peer lending networks. You might also want to look into crowdfunding to raise extra capital for your business.

2. Liquidate Equipment and Inventory

If you’re unable to get a loan or you’ve already exhausted that option, you might consider selling some of your non-essential equipment or excess inventory to generate cash flow in the short-term. While this might seem like you are taking a step backward because you’ll be losing some of your valuable assets, it might be worth trying if it’s going to save your company or allow it to capitalize on additional promotion and expansion opportunities. However, take caution when liquidating items on auctions sites like eBay, as there are risks that come with selling certain high-value items on these platforms. Instead, look into local auction houses, consignment services, and direct selling through classified platforms like Craigslist.

3. Reduce Overhead and Payroll Expenses

When cash is leaving the business faster than its coming in, you’re bound to be stuck in a nightmarish cash flow cycle on an ongoing basis. Consider downsizing to a smaller office, eliminating some of your leasing obligations, and terminating non-essential services that could be handled by in-house employees. Likewise, you may want to try consolidating roles into fewer job positions to reduce the number of staff members you need to keep the ship sailing.

It’s Never Too Late to Come Back

Even if a business is down to its last dollar, there is a still the possibility of being approved for a loan. Thus, any small business that is experiencing cash flow problems should at least attempt to follow the advice given in step 1 above. In many cases, external financing is the only option that can save a small business from going under, especially when there aren’t enough assets to liquidate and overhead has already been reduced as much as possible. While going into debt might not be what you had in mind, if it saves your company and gives you a way out of the hole, it’s definitely a solution worth trying.

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