Keeping a business running and alive is hard work. A businesses cash flow, is one of the most important factors in being able to stay open and unless it’s healthy, businesses won’t be able to keep going.
Businesses can lose money in several different ways and sometimes you can be caught out losing cash in manners you couldn’t have anticipated. So, what are some of the most common means of a business losing money?
Big, unexpected bills
Sometimes even the best laid out plans can result in problems, or a business can simply be hit by a bit of bad misfortune. Unexpected events such as a fire, a piece of machinery breaking or a robbery can sometimes set businesses back thousands. A huge bill like this can leave a business reeling and even in a position of insolvency. Having money set aside for a ‘rainy day fund’ is crucial when it comes to keeping cashflow level, as it means you can keep a business on a level playing field in case of emergency.
Slow paying clients
Clients who take a long time to pay can be a sucker for any business. Simply put, your business needs to be paid on time, or within the timeframe you have set out for an invoice to be paid. Having multiple clients take a long time to pay be a big hit to cash flow and put your accounts in the red. Asking clients for money can be an awkward feeling, especially after you’ve already sent an invoice. Make sure you keep track of everyone who owes you money, and don’t be afraid to ask them for what you’re owed.
Seasonal business
Lots of sectors and businesses and sectors count on seasonal work to keep things going. Having an understanding of how that works and deciphering the right time to use, the right kind of advertisement, is crucial when it comes to keeping cashflow in a good working line. Making sure that you spend the wisely in marketing is so important when it comes to maximising seasonal business.
Revolving door of staff
Although you might not think it, staff cause some of the biggest turnover when it comes to money going in and out of the business. They are a bigger cost than many think and if not done correctly, can be a major sap.
Hiring the right people, for the right kind of jobs at the right time is difficult enough. However, if those staff don’t work out, it can make things even more costly. Spending money hiring people and then training them, for things not to work out can be a major drain. Even using temporary workers to plug a gap can often be really negative for cash flow.
Ignoring problems already there
If issues are already within the business, or you believe that there are problems just round the corner, ignoring them are the worst thing you could do. If you already have a negative cash flow, or it looks as though things could become negative, burying your head in the sand and hoping things will get better without taking action will undoubtedly be even more detrimental.
Finding solutions even within the business, i.e, looking at ways of cost cutting, maximising your output, or improving your business procedures can help to out your cash flow onto a better track. Alternatively, if you’re at a point where you are facing legal action from creditors, looking at formal repayment plans or methods of bringing more money into the business can be a major boost and a great means of levelling out your cash flow.
In summary
Losing money is very natural for almost all businesses. Nothing will simply be a run in the park, if it were, no business would ever go bust. However, looking at the bigger picture, not wanting to grow too fast and not spending unnecessary money will set you on the best path and give you the most level cashflow. Ensure that you stay on top of your business processes, who owes you money and how your business is performing. If you begin facing action from creditors, look to have everything as well set up as possible and if you need help, make sure you look to find it. Don’t forget that sometimes closing the business can be the best way forward, if you’re facing he debts and it’s unrealistic you’ll be able to continue, closing down and starting again might be the best way forward.
