Cash flow is a commonly recurring problem throughout all stages of your business.
No business ever gets off to a perfect start. Some of the issues you’ll likely encounter will have to do with your budget. As a business owner, you’re likely to measure expenses incorrectly or there won’t be enough money in your account to handle last-minute emergencies.
The Costs of Running a New Business
High Overhead Expenses
Overhead expenses are typically the utilities associated with your business, such as the cost of renting your office space, your telephone network, electricity bills, and similar expenses.
Excess Inventory
It’s easy to assume that everyone will be interested in your products firsthand and rush to work with you. However, unless you’ve engaged in extensive advertising and have a long line of pre-orders, you’re not likely to experience solid business until some time has passed.
As a result, you may wind up with more products than necessary in your warehouse. You’ll also have spent more money than required, and you’re left with several items at the end of the month that may go unsold.
Not Collecting Your Receivables on Time
Clients don’t always understand that you have expenses or bills to pay, which means they might delay when it comes to paying invoices. This, in turn, can lead your company into not having the money it needs to take care of itself. This can include utility payments, equipment rentals or being unable to provide refunds to clients.
Over-Borrowed Money
Over-borrowing money is likely to spike your debt to income ratio. In other words, you’ll owe far more than you’ll be earning, which can cause your business to suffer down the line or shut down prematurely.
Not Being Aware of Your Payables
If you’re not aware of what you owe, you’re likely to miss out on payment dates. This can lead to fees, penalties or higher interest, meaning you’ll wind up owing more than what you originally borrowed. You’ll have to dig deeper into your funds, and you’ll have less to contribute to your business operations.
An Expert in Financial Management Will Work for You
If your budget allows, you should make room for an expert in financial management along the way. They can help you organize your finances so you pay the best rates for utilities and don’t spend too much when it comes to inventory.
They can also tackle additional issues. For example, one common problem you may experience is a slow invoice period. You’re required to allow your clients up to 60 days to pay set invoices, but you may find it difficult to wait that long. You have expenses rolling in, and you need your money as soon as possible.
An expert in financial management can work with your clients and offer them incentives to pay faster.
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