10 Tips to Solve Cash Flow Problems

With fundraising opportunities reduced and increased demand for service delivery charities, large and small, are feeling pressure on cash flow, here are 10 tips to help in solving your cash flow problems.

1. Use a monthly business budget

If your business is seasonal or cash flow tends to follow a cycle, an annual budget and accurate cash flow statement can shed light on just how much money you’ll need each month to pay recurring bills. You’ll need to save money from the high-revenue months to cover overhead during lower-revenue months. A monthly cash flow forecast can reveal potential shortfalls and give you time to seek extra cash if needed.

2. Access a line of credit

If you have limited cash flow, one solution is to set up a line of credit. Like with a credit card, you’ll have money to spend that you can pay back during better months in your business cycle. Unlike a term loan, you’ll only pay what you use, along with interest on the outstanding balance. Best of all, once you’ve paid it o

ff, your line of credit replenishes and is available again when and if you need it.

3. Stretch out payables

Extending the payment cycle of your suppliers is a common way to obtain cheap financing. With this strategy, you simply choose to pay certain bills past their due date. However, it’s not a long-term solution, as it can impact your credit and sully your relationship with suppliers.

There are two ways you can protect yourself should you decide to stretch out payables. For one, you can negotiate the due date to a date on which you are confident you can pay. Or, you might want to reconsider your payment agreement altogether. Some service providers will allow for annual or semi-annual payments instead of monthly. Paying annually upfront might even net you a discount.

4. Reduce expenses

Is overspending putting you in the hole? Many businesses approach this problem by cutting the largest expenses, such as inventory, marketing or labour, first. That’s a mistake, as these are typically core to business operations. Instead, consider cutting nonessential costs such as landscaping or housekeeping first. Then, audit your overhead expenses, including rent and utilities. See where you can cut back, get better rates or renegotiate contracts.

5. Accept credit cards

Accepting credit cards translates to quicker payments and fewer bad debts. It also improves the likelihood of donations. However, credit card companies typically charge a fee to merchants that use their service, so you’ll need to weigh those costs against the benefits of quicker payments. Some companies have preferential rates for not for profit organisations.

6. Accept online donations and payments

Just like credit cards, an online donation and payments option—and an ecommerce shop in general—makes shopping more convenient. It also can help you move inventory more efficiently. Take, for example, a walk-in bakery business. There’s little control over how many pastries it sells or throws out on a given day. If that same business moves ordering online, it can save money on its storefront, bake to order, and perhaps even ship nationwide.

7. Maintain a Clear View of Inventory

If you don’t have a clear sense of how much inventory you have at any given time, you run the risk of overstocking, thereby creating waste and tying up cash flow in that stored stock. Consider investing in an inventory management system that integrates with your accounting software. That way, you’ll maintain a real-time view of how much stock you have on-hand, how much you paid for each product, how much you actually need at any given time and more.

8. Cut Costs by Identifying Waste

Are you adding unnecessary materials like tissue paper to products you distribute? It may be time to slim down your packaging. Are payroll costs becoming a drain? Consider cutting overtime and excess staffing as much as possible.

9. Improve Profit Margins with Vendor Discounts

If you’re a good customer, your vendors may be more than happy to cut you a break. Or, they may throw in perks such as free shipping or extra products, especially if you’re buying in bulk.

10. Improve invoicing

Are you on top of your invoicing? The more promptly you send out invoices, the quicker you’ll get paid. And, in turn, you’ll benefit from healthier cash flow. If invoicing is consistently lagging, it may be time to invest in accounting management software. The best accounting software helps you ensure accurate, timely invoices while avoiding potential errors from manual bookkeeping. You’ll have a dashboard with a real-time view of all transactions and an electronic trail of all related records, which will come in handy when it’s time for auditing.

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