What causes cash flow problem?

Cash is the oxygen of the organization.

Here are some common causes and solutions of cash flow problems in small business:

  1. Lack of Payment Term Discounts
    If you deliver product or service without upfront payment, it reduces your cash reserve. Always offer customers discount in order to encourage them to make their payments quicker to receive a discount. Always ask the question “is my actions adding cash or burning cash?”
  2. Lack of Tracking
    You cannot achieve success in business without tracking result. Work with a software vendor to track the areas of business (i.e. inventory management, supply ordering, and procurement) where you can improve cash flow to reduce waste and improve turnaround times.
  3. Failure to Perform Credit Checks on new clients
    Never do business with a new client without checking their credit. This way you will avoid an untimely payment or a payment default from a business with a poor credit history.
  4. Slow Product or Service Turnaround Times
    Shorten the delivery times of products or services to customers to maximize the level of potential profit.
  5. Taking Cash Instead of Credit
    Change business structure to where your only methods of payment are credit cards or online banking systems to decrease the wait time for business payments by check.


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