Working capital can make or break a business. Businesses that have customers lining up and stay busy can fall apart simply because it lacks cash flow. When you pay attention to your cash flow and understand how it flows in and out of the business, you can turn around cash flow problems fast.
The main principle to remember is a business needs to have more cash coming in than going out.
Managing Cash Flow
Consider creating a cash flow statement, which is a great tool for forecasting how much cash flows in and flows out. If you don't know how to create one, ask a bookkeeper, CPA or other finance professional.
Cash flow statements identify upcoming expenses so you know when you need to cover those. Having this information showing you times when you're low on cash will help you be proactive and plan for it.
It's not required that you have a full-time finance professional. Outsourcing is a good option because you don't pay a full-time salary or benefits. Better to invest in hiring help than running out of cash flow and going out of business.
Here are eight tips for managing cash flow to give you more ideas on what you can do.
Sometimes the situation calls for getting a loan or exploring other financing options.
Exploring Loans and Financing
When you work with payment, do what you can to delay payment within reason. For example, use a credit card to pay for expenses. Don't pay an invoice the day it arrives. Wait until it's closer to the due date. It allows you to control timing of expenses and receivables.
If your business cannot get the cash flow balanced or you want to grow, it may be time to look into loans or financing. This doesn't always mean going to a bank where requirements can be tough to meet.
Private lenders can act like a bank except they have more flexibility and fewer rules. They can do loans and various types of financing such as factoring (also known as accounts receivables and debt factoring).
You can also talk to your vendors and suppliers about a discount or a payment plan. They may prefer to get paid now at a discount than wait for the full amount to come later. You could try bringing in cash by selling buildings, machines, inventory, equipment or finding a cheaper lease.
What Our Clients Are Saying
- George Del Toro,
We were funded [in 10 days] (the approval process was very smooth). The way I spend my time has changed dramatically since then. I can spend as much time as I need visiting with customers and out on the field... In closing I would like to tell you that Capital Solutions has made it possible for GDT Well Service, Inc. to triple (300%) its business in the last year, without any of the "growing pains".
GDT Well Service
- Keri Gray,
The HUGE difference I found since we are working with you... is in the day-to-day life... Since Capital Solutions is funding us there is no "fear"... when I talk to a vendor or need to make payroll. You guys have also bent over backwards... to make it work for us. I really appreciate that.
- Brenda and Mark Neufeld,
In our very first conversation I noticed that you not only understood our situation, but also the Oil & Gas trade. Capital Solutions has been an invaluable help... We have grown our business exponentially thanks to you. I can now probably qualify for a traditional line of credit (...but I'm not sure I want to).
B.N.M. Piloting Services