As most business owners are aware, there are endless reasons why there might be interruptions to cash flow. If enough of these interruptions occur at the wrong time and you can’t cover the shortfall, it can be bad enough to force you right out of business. That makes it extremely important to anticipate the most common types of cash flow obstacles, and your strategic planning should take these possibilities into account.
It’s a fairly well-known fact that most businesses wait an average of something like 70 days before receiving money from a customer. In that length of time, you could literally go out of business – so part of your planning should focus on effective billing practices that will help to maintain cash flow.
Most businesses which are seasonal in nature are very predictably so, and that means you should have no problem planning for those same times of each year when business slows down. To cover those cash flow gaps, you can set money aside before the off-season hits, or you could diversify your products or services to have other revenue sources.
Lack of profits
Having steady incoming revenue isn’t the same as turning a profit, as many bankrupt business owners can attest. You only really have a profitable business when you have money in the bank each month after paying out all your expenses and other payables.
If you don’t plan for tax time each year, you can quickly go in the red when the time comes. Avoid this by consulting with a professional accountant, and by reviewing your bookkeeping each month, so that you always have at least a fair understanding of your tax status.
This might sound like a nice problem to have, but if you do suddenly find yourself in a sudden burst of business expansion, you might be totally unprepared to handle it. To prevent this from happening, use computing procedures and applications which can scale up as your business grows.
Banks and other lending institutions will sometimes withhold funds from your business when you are consistently unable to meet goals. To plan for such eventualities, you can apply for a loan which is more than you actually need, so you’ll have some overlap funding to cover such unexpected shortfalls.