Red Flags That Say You Are Having Cash Flow Problems
Cash flow is a term that gets thrown around a lot, and most of the time, businesses don't understand it. It can sound scary if you're not familiar with it, but it all comes down to one thing - how reliable your finances are. How much money you have and how much you spend can all have an effect on your cash flow and whether or not you have enough to survive. If the money stops coming in, your business will be in serious trouble.
That being said, we have listed a couple of indicators that tell you may be having cash flow problems.
This happens more often than you think. The biggest reason for this is that companies get busy and lose track of the money they owe you.
The best thing you can do to combat this is to ensure that you get paid upfront. If you aren't prepared to do that, charge a higher rate for your work. This gives you more of an incentive to get the client to pay you quickly.
If you're receiving payments but they're incomplete, it will have a negative effect on your cash flow. Insufficient payments happen because they only pay you half of what they owe you. It can also be because they are taking your services but not paying you.
To combat this, you should introduce payment terms to know when you will be getting paid. This can be done by adding a late fee for more than 30 days of overdue payments.
Assets Are Not Increasing
When you're doing well, your cash flow should increase as well - what goes in should go out. If you are not seeing your assets increasing, this is a sign that you are not getting enough money coming in. This can then mean that you're struggling to keep up with your expenses.
The only way to combat this is by collecting money and increasing your assets. The best way to do that is to get the client to pay you more.
Missing expenses are telling of a cash flow problem. This could be because you are spending more money than you make in your business. If this is the case, you may be in trouble.
If you don't have enough money saved to pay your expenses, you will be in serious trouble. You should increase your cash flow by finding new ways to make money. This can also be done by collecting money from clients and your asset collection.
If your business isn't doing well, your cash flow will be affected. Suppose you receive the same amount of money, but your expenses are increasing. In that case, you may not be making enough money to sustain your company for an extended period of time.
This is why it's essential to understand what you should charge for your services. Charge more than other companies and ensure that you get paid upfront. Ensuring that you get paid on time is the best way to ensure that you will have enough money to continue doing business. If you can't get paid after a couple of months, you'll have to choose what is most important to you: paying your bills or keeping a roof over your head.
Cash flow is a constant struggle for many businesses. You must pay attention to these red flags to ensure that you have enough money to pay your bills and keep your business running smoothly.
It is also the lifeblood of your venture. If you don't have enough of it, you could be forced to shut down. Understand it and take appropriate steps to ensure that you are making enough money to support your business all throughout.
If you are looking for an experienced accountant in the Gold Coast that will mentor you with your cash flow, look no further than our experts here at New Wave Accounting. We are here to provide end-to-end accounting and bookkeeping services that help scale and grow businesses. Call us today and let us help you with your cash flow concern in no time!