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August 12, 2019 / By Reuben Katz

Common Cash Flow Challenges Faced by Small Businesses

Every business requires a steady and reliable source of income to meet their needs and make sure that their business operations run as smoothly as possible. However, it is a fact the most business owners face problems with cash flow and find themselves in a tough financial situation. A recent study found out that cash flow issues not only lead to monetary problems but also cause emotional imbalance and troubles with the administrative processes. That is why it is very essential for all business to understand what cash flow challenges might come their way, and be prepared for the same with effective measures. Below are some of the most common cash flow troubles faced by small businesses.

  • Managing Receivables – Receivables refer to the amount you are owed for providing your services. Usually, new businesses fail to manage their outstanding receivables, which in turn lead to a shortage of income to run their daily operations. It is reported that about one-third of the small businesses in the US go on with roughly around $15,000 in outstanding receivables.
  • Managing Payables – Although the advance payment method helps businesses to charge for their services beforehand, it can take a long time to actually get the invoice paid and process it for their daily operations. Around 60% to 70% small businesses reported that it takes about 25 to 30 days to receive payments after issuing the invoices to their customers, while they still have to pay to their suppliers to ensure smooth business operations.
  • Managing Employees – Even though the income of the business is affected due to late payments and outstanding receivables, the company cannot delay employee remuneration. However, most small businesses find it very difficult to pay their employees on the assigned payday because of the lack of cash flow. When employees are not paid on time, the company might not be able to retain the required workforce for daily operations.

Resolving Cash Flow Challenges

Monitoring the payments and receivables on a weekly basis is the best way to keep track of the cash flow. Nonetheless, as these can be sometimes out of the control of the business owner, it is always better to seek out practical funding options to manage the cash flow troubles. For instance, availing a short-term loan from online lenders can be of great help in such scenarios. They release the loan amount very quickly that you can use to fulfill your business’ financial requirements. At the same time, continue keeping an eye on your outstanding receivables and follow up on the invoices promptly. This way, you can repay the loan amount without any hassles.

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