AT ONE POINT or another, every business will run into cash flow problems.  With the fragile state of the global economy and politics, this is one problem that can’t be avoided forever.  It is the desire of many business people to prevent it, but that simply isn’t possible.  At one point, your business shall have to run on the edge.   

Slow paying clients is one of the main contributors of cash flow problems.  This is something that happens when commercial sales payments are delayed.  After delivery, depending on the payment terms, it can take up to a month before the cash is paid and the account is settled.  This can inconvenience many businesses as they need to pay their own expenses.  This problem can be handled if the company has some cash reserve or can get their clients to agree to stricter payment terms.  Cash reserves should be large enough to clear all the expenses as the company waits to be paid.

Another major cash flow problem islackluster accounting.  This is a time when the expenses will outweigh the income, but the books won’t reflect the imbalance.  This problem could see the activities in a company paralyzed. The best solution to this problem is to get bookkeeping software and hire someone with accounting experience to keep track of your books. This person doesn’t have to be a CPA—just someone with good organizational skills. If you’d rather play it safe, however, hiring an outside bookkeeping service is also an option.  

Disorganized invoicing is another cash flow problem that many businesses face.  Similar to lackluster bookkeeping, there are times when the work done, but isn’t invoiced out.  This leads to a confusing situation and unbilled products and/or services at the end of the day.  If you can believe it, some business people say that they are too busy to chase down outstanding invoices.  It’s good to ensure that all invoices are cleared as late payments may create havoc with your cash flow.  Your bookkeeping should be able to show the cleared and uncleared invoices.

Slow sales can also lead to cash flow problems.  For a company to make large profits, the sales should be done quickly and in huge numbers.  In a case where the company is experiencing slow sales, the amount of income will also tend to be low—makes sense.  Your marketing strategy needs to be revised to meet the demands in the market.

There are times when businesses will face the problem of too much debt.  This is a problem that will eat into the profits.  To get yourself out of this, you need to come up with a way of balancing between cash outflow and cash inflow.  The basic way to accomplish this is to ensure the amount of money coming in is more than the amount of money going out. This, combined with precise bookkeeping and conservative payment terms, will play a vital role in keeping your business in the black at all times.