How Smes can Overcome Payment Challenges

Thursday, one of my clients, a company with mid-7 figure revenues (7 figures = milliions) had a serious potential cash flow problem. They made payments anticipating that sufficient funds would be collected in time to cover payments they were making. Predicting cash flow during the holiday season is always tricky. We had good reason to expect the incoming deposits, but sometimes hiccups happen. The funds they anticipated did not arrive and we knew they would be in an overdraft position when deposits and payments settled last night. We couldn't afford to have any payments "bounce". We contacted the bank and explained the situation. We spoke to the Senior Vice President responsible for our account. He agreed to make sure that no items were returned, even if there wasn't enough money in the account. In other words, he agreed to allow an "over draft." The company does not have a line of credit with this bank, so the Lessons I'd like to share from this: 1) Make sure you have a good relationship with your banker. Have regular converstions with them, so that they know who you are, what you do, and what is normal for you. 2) When you have a challenge, talk to them and tell them what is going on. They are more likely to support you when they feel like they understand what is going on. Ask for their help in appropriate ways. Be sure to tell them how you will solve the issue. 3) Be on top of your numbers. Be aware when you have a potential problem. Understand the risks you are taking. Things might go worse than you expect, but when you are facing a challenge, it is best to show that you were aware of it and may have taken a well-calculated risk. In summary, all business comes with risks. Being well aware of them and having a good relationship with the people who can help you when problems arise simply makes good business sense.

I took a pole of #entrepreneurs and #business #owners on what the number one business challenge each owner faced. 89% of participants said the top issue was #CASHFLOW. To break that down even further, the number one #cash #flow problem faced by entrepreneurs is maintaining steady cash flow to cover expenses, especially during the early stages or slow seasons. This issue often arises due to delayed payments from clients, seasonal demand fluctuations, or unanticipated expenses. Here are some of my TOP Solutions: Implement a strong cash flow management strategy by using these tactics: - Invoice Promptly and Offer Incentives for Early Payments: Send invoices as soon as a product or service is delivered and consider offering small discounts for clients who pay early. Clear payment terms (e.g., "Net 15" or "Due Upon Receipt") help set expectations. - Negotiate with Vendors: Work with suppliers to secure extended payment terms. This can free up cash to manage other immediate needs. - Build a Cash Reserve: Establish a buffer fund to cover essential expenses during lean periods. Aim to save enough to cover at least three months' worth of operating costs. - Consider Financing Options: Lines of credit, invoice factoring, or business credit cards can provide temporary relief during cash flow dips. But use these sparingly to avoid long-term debt. These strategies can help entrepreneurs maintain consistent cash flow, making it easier to manage expenses, invest in growth, and navigate challenging times.

Are you a small business owner continually challenged with cash flow problems? Here are a few simplified solutions for managing cash flow in a small business. Get paid faster: Create a system to invoice customers and follow it consistently. Remind customers if they're late with a payment. Do not be afraid to ask for money due. The longer an invoice grows older in accounts receivable, the greater the percentage grows of never getting collected. Save for emergencies: Set aside some money each month as a backup in a separate bank account for unexpected expenses or when business slows down. Aim to save enough to cover at least three to six months of your regular expenses. Control spending: This one sounds simple, but very few small business owners diligently track their expenses. Be careful with your spending. Separate essential expenses from non-essential ones. When money is tight, try to cut back on things you don't need for daily operations. Also, try negotiating better payment terms with suppliers to give yourself more time to pay. Which one will you implement today? Or do you have a simple solution to help other small business owners struggling with cash flow? #CashFlow #SmallBiz #BusinessStrategy #FinancialSuccess