Having money on paper is definitely better than not having money at all. However, there are times when you won’t be able to tell the difference. You see, even though you have money (in theory), you don’t have enough to pay your employees, your suppliers, invest in new equipment or even pay the utilities and the lease on your office. When this happens, you’ll be forced to halt your operations even though you might stand to profit greatly in the future. To resolve this issue, you need to learn how to solve your SMBs cash flow problem. Here are several suggestions.
1. Sell your invoices
There’s a reason why we started with the money-on-paper statement. In a lot of scenarios, a new company does have a market for their products. However, due to the fact that they’re selling these items on a credit, they don’t have the money on their account. Fortunately, factoring companies are willing to buy some of these account receivables. The standard fee that they charge is between 1,5 percent and 5 percent of the total value of the invoice, which, depending on the invoice, may be a substantial amount of money.
2. Hire a debt collector
Another thing you can do is hire a debt collection agency in order to get your money from those clients who you deem as less than conscientious. It’s a cleaner way to deal with the problem, seeing as how you won’t have to feel like you’re directly strong-arming these clients. The benefit of this method lies in the fact that you might not have the means to collect this money on your own, even though it’s rightfully yours. For those who are still reluctant, you need to stop looking at this money as your own private funds. Look at things this way, some of your clients are withholding cash from your employees, suppliers and your landlord, which is something you simply can’t tolerate.
3. Apply for a loan
The next method on the list is probably the simplest and the most straightforward technique you have available – applying for a loan. The downside of this method is that you may have a bad credit rating, that you’ve earned while fundraising to launch a business. Still, credit rating can be repaired on a short notice and there are some credit unions that don’t insist on it, to begin with. Apart from this, you might also fear that your loans won’t be there in time, due to the application process that requires a ton of paperwork. Fortunately, there are some online lenders providing quick loans for those who need them.
4. Cut down on your expenses
No matter how much money you earn, unless you know how to control your spending, you won’t get anywhere. This is why you need to learn how to control your spending in the most efficient way possible. We’re talking about austerity and frugality where it’s smart to make them, not where it would harm your productivity.
For instance, you could save money by going for a worse supply of raw materials for your products, however, this would result in a drop of quality, which would hurt you badly in the long-run. You could also skim on bonuses for your employees, yet, some of them (the most productive and ambitious) would quickly leave your employ. In other words, when threading these grounds, you would do well to thread with the utmost care.
5. Consult an accountant
At the very end, you should schedule a meeting with a professional accountant and ask them for an opinion regarding your case. You might be eligible for a tax return or deductible that you aren’t even aware of. Something like this could turn out to be groundbreaking. Moreover, through some diagnostic accounting, you might be able to spot and seal a money leak before it turns into a much bigger problem.
While each of these methods may be effective on its own, there’s no reason whatsoever why you shouldn’t apply all of them at once. So, hire an accountant, get your money back, get your hands on some additional capital and be careful what you spend it on.