Managing Cash Flow

5 Tips on How to Help Improve Cash Flow in Your Small Business

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One of the biggest challenges that many small businesses face is following up on late payments, which can consume valuable time and resources. Having no cash to hand to take care of day-to-day expenses is a major reason why many businesses fail. In this blog, we'll run through some tips to help you maintain a positive cash flow for your small business:

5 Tips on How to Help Improve Cash Flow in Small Business -

Encourage customers to pay on time

The easiest way to eliminate cash flow problems is by ensuring, as far as possible, that you receive payment for goods and services on time. There are a number of ways you can do this. Try offering early payment discounts to customers who pay up front, for example, or shorten your payment terms from 30, 45 or 60 days to immediately after a project is completed. Asking for payment at specific stages of a project, or when certain milestones are completed, is another way to ensure the money keeps coming in.

Delay your payables

You can buy time by delaying or extending payables to vendors who don’t demand immediate payment. However, you should be careful not to damage the working relationship with your distributors. Only delay your payables if you are sure that your suppliers are OK with it - and watch out for any late fees!

Provide numerous payment options for your customers

Most payment delays are due to restrictions imposed by certain payment methods - the reasons checks are less popular these days is because of the time it takes for them to clear. Most customers will be happy to pay with credit or debit card, but consider accepting direct bank transfers, PayPal payments, and e-checks if you don't already do so.

Use the right cash-flow management tools

You need the right software to keep track of money inflow and outflow. With the right tools, you can save time and have a clearer, more informed picture of your payables and receivables.

Consider short-term financing

Taking out a short-term loan can help your business if you're facing a shortfall due to delayed payments from your clients. Short-term credit helps to cover the gap between receivables and payables, or settle emergency purchases. You can use these funds to pay your distributors. Fast small business loans from a strategic funding source like LVRG is the first step in growing your business.

For more assistance on how to finance your small business, or to find out what small business capital loans you qualify for, contact LVRG today. We offer various small business funding options to keep your business running without any hitches.

 

What are the signs of a healthy cash flow statement for your small business?

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It’s common for small business owners to feel out of their depth when it comes to managing their finances. In fact, one study found that 82% of small businesses fail because of cash flow problems. But how do you know when you’re doing OK and when you’re about to run into difficulty? Here’s an overview of the signs of a healthy cash flow statement in relation to the main sections of your statement.

The bottom line

The overall performance of your company can be determined from the net increase or decrease in your cash equivalents. It’s this that determines the change in your finances from the last period. However, it’s impossible to get a full analysis of a business’ performance from the bottom line alone. A more thorough look at each section of your cash flow statement is needed as they interact with one another, showing the kinds of activities your business is undertaking and its potential for growth.

Operational activities

When it comes to charting income from your principal business activities minus costs like accounts receivable and payable, deferred taxes and one-off charges, you should ideally end up with more money coming in than going out. Not only that, you should be able to see that it grows month on month. Decreasing sales, squeezed margins, and late customer payments are all reasons you could be experiencing a negative cash flow here. You can try and curb this by re-evaluating your marketing strategy, finding ways to add value to your service or product, and reducing your number of debtor days (the amount of time it takes customers to pay) as well as following up on late payments with penalties.

Investment activities

This is the income you have from buying and selling long-term assets, and if you are growing, it is generally regarded as a good thing if your net investment cash flow is negative. This might be because you are investing in new property or equipment in order to develop and innovate, which can be tantamount to expansion. The key is keeping it consistent.

Financing activities

The financing aspect of the cash flow statement records any incomings and outgoings between a business and its creditors. It’s often considered that a negative cash flow here is the marker of a stable business because it isn’t relying on selling its financial assets but instead income from its operational activities to pay off debts and dividends.

Still, it’s important to note that there’s nothing wrong with a positive net cash flow in this section from time to time, especially if you are a growing business. Borrowing working capital can help fund your expansion plans; the trick is ensuring any external financing is repaid on a consistent basis. This won’t just improve your cash flow statement but will raise your credit rating and make you more appealing to investors and further lines of credit to fund any future growth.

Maintaining a healthy cash flow

A healthy cash flow is crucial to ensure your business keeps ticking over, but if you’re struggling, you shouldn’t feel alone. A strategic funding source like like LVRG can help give some security to your small business with fast small business loans. Whether you’re in the restaurant, retail, manufacturing trade, or any other, your cash flow statement is there as a guide to help with revenue forecasting, enabling you to determine how much you can afford to borrow, and providing an incentive to financial backers about your ability to pay it back. Have questions? We're here to help!

 

How Working Capital Financing Can Boost Small Business Growth

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Small businesses experience cash flow problems at one time or another, regardless of how experienced the owners are. Entrepreneurs mostly rely on working capital to keep the business moving and, when there is a shortfall, the next best option is to seek financing. Working capital financing comes in handy to meet expenses like the purchase of inventory, meet payroll obligations or other short-term obligations. It reduces the pressure that comes with hitting a rough patch in the course of operation.

There are numerous business loan lenders that small businesses can seek financing from, however, most small business owners prefer a strategic funding source such as LVRG. Depending on the needs of the business at the time of funding, there are a variety of product options that the business owner can choose, including fast small business loans, lines of credit, term loans, small business capital loans, and cash flow loans. Once a business can meet its short-term obligations through working capital financing, it will be able to invest in long-term growth.

Working capital financing can boost the operations of a small business in the following ways:

Help manage cash flow

Many small business owners find it hard to keep money in the bank, which means that, when there is a financial crunch, they have no money to fall back on. Working capital financing helps the business owner meet significant overhead and operating expenses, from increasing stock to paying employees. Sometimes, it may even cover mortgage expenses when the business has financial challenges.

Bridge seasonal shortfalls

Seasonal shortfalls occur when the business is tight on operating capital. At the end of the busy season, a company may need extra cash to cover the coming months for ongoing expenses like insurance, rent, salaries and utilities.

Hire additional resources

One of the most crucial things for any business is to provide stellar customer service to its clients. During busy periods, a company may seek a working capital loan to facilitate the hiring of additional temporary staff to meet the expectations of their clients and handle the rush.

Undertake a large project

There are times when a small business will require more space to remodel their business structure to be able to provide a better experience for their clients. Financing for working capital can fund such a project to support the growth of the business.

At LVRG Funding, we have the solution to your business funding needs. Contact us today and our financial experts will help guide you on the working capital funding process.

 

How can a profitable business have cash flow problems?

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Before we demystify how a profitable business can have cash flow problems, it’s important to understand the difference between profit and cash flow. Cash flow represents the closing balance of a business after deducting the cash paid from the cash received in a given trade period. Any business needs to have a positive cash flow to handle the day-to-day expenses. On the other hand, profit represents the balance between the revenue and expenses incurred after every sale.

Recent studies show that more than 80% of small businesses fail due to cash flow problems. This statistic is alarming, yet sadly many of these closures could've been avoided with the proper cash flow management system in place. And, accessing capital at the right time. So, what could be the main cause of negative cash flow for a profitable business?

Growing too fast

Most entrepreneurs get overwhelmed by the progress of their business and seek to open other locations too soon. This can lead to over-trading, which puts a lot of pressure on short-term finances. The main problem occurs when the new locations have to rely on the already established ones before they start generating profits. This can often lead to major cash flow problems.

Small Business Growth Capital, Explained. And When Your Business Needs It.

Advanced payments

Paying for expenses in advance could mean that there will be more cash going out than coming in. For instance, paying for insurance has a negative effect on the cash flow because there will be no money flowing in to cover this deficit. Such expenses are necessary, but they reduce the amount of cash available to keep the business afloat.

Giving too much credit

While offering goods and services on credit can attract more sales, it can also lead to major cash flow problems. Late repayments and bad debts leave your business with no cash to operate.

Acquiring long-term assets

Using the cash you have to buy new equipment for the business will create a big gap, because more cash will be going out than coming in. It's good to budget for such expenses after a trading period, once the accounts have been reconciled and profits identified.

Paying for loans

Loan repayments can also have a serious effect on cash flow because once the money is paid, only the loan interest is recorded as an expense when calculating profits. However, loan repayment means that more cash will be going out, not just the interest. This leaves a negative balance on the cash flow, which may not be reflected when you come to calculate your profits.

You can avoid cash flow problems by seeking professional financial assistance by LVRG, the #1 name in small business cash flow funding. Click here to contact us for the best financial advice pertaining to growing your business, or click the button below to apply for funding.

 

Why Cash Flow Loans Are Growing in Popularity Among Small Businesses

Why Cash Flow Loans Are Growing in Popularity Among Small Businesses

Why Cash Flow Loans Are Growing in Popularity Among Small Businesses

Cash flow is the life blood of every small business. Revenue is essential for businesses to invest and grow. However, a lack of cash flow can also bring a small business to its knees. In fact, insufficient revenue and profit is one of the main reasons 8 out of 10 businesses will fail.

This creates a difficult balancing act for small business owners and managers. How does a small business grow, develop revenue streams, and continue to manage their obligations like employee pay, vendor orders, and utilities? The cash flow is strong and further investment in the business could increase cash flow significantly, but where is that investment supposed to come from?

While there is no magic wand that can provide the answer, a cash flow loan is one important tool that allows small businesses the opportunity to invest in their future.

Even though these businesses may not meet the strict lending requirements set out by banks, there could be other creative borrowing options like cash flow loans that look at the underlying measures of success rather than broad qualifying criteria that doesn’t tell the full story about the business.

What Is a Cash Flow Loan?

Cash flow loans are a new concept to many borrowers. Since this is a non-traditional form of lending, you may not have heard about cash flow loans from your banker.

Simply put, cash flow loans allow businesses to use their business cash flow as collateral to secure a loan. This is perfect for rapidly growing businesses with good cash flow that need additional funds to take advantage of emerging opportunities.

Since cash flow is the main focus, factors like individual credit scores play less of a role than they would in traditional lending scenarios. For this reason, cash flow loans are sometimes more accessible to borrowers who would otherwise fail to qualify for a traditional loan due to their credit history or lack of business financials.

Simply put, a cash flow loan looks at a current snapshot of the health of the business to determine if the business can secure and support funding.

Why Cash Flow Is So Important

If you are currently running a business, then you know the importance of cash flow. Not only does cash flow cover regular expenses, but a cash flow surplus allows businesses to invest in their own operations and grow more rapidly.

Small businesses, especially new businesses, do not always have the funds on hand to pursue new revenue streams. Cash flow management can be very difficult as small businesses have to balance their day-to-day expenses with investing in growth.

In fact, cash flow is so important that it can be one of the most valuable ways to assess the strength and potential of a business.

Quite simply, businesses with a positive cash flow have the ability to invest in areas of their operation that will allow them to further grow their cash flow. As the old saying goes, success breeds success.

Comparing Cash Flow Loans vs. Traditional Bank Loans

Many business owners will go to their usual bank branch to seek lending for their small business only to leave disappointed. This is especially true for new small businesses that are rapidly building their operation, expanding into new areas, and pursuing lucrative opportunities.

Banks have a standard formula when looking at small business lending. Individual credit scores play a large role in determining if lending will be granted. In addition, banks often want to see a minimum of two years of business financials. For businesses that are less than two years old, getting traditional bank lending is often an uphill battle.

When securing a cash flow loan, lenders are much more interested in seeing the cash flow management of the business. Future cash flow potential may also be taken into consideration. These requirements may be easier for small business owners to satisfy.

Growing Business with a Cash Flow Loan

There could be dozens of opportunities for a small business to grow their revenue. Of course, taking advantage of new revenue streams means having cash available. This is where strong cash flow management and, potentially, a cash flow loan come into play.

When the bank says they cannot grant a traditional loan, what are business owners to do? Sit back and accept the situation as their competitors take control of the market?

A cash flow loan is an important tool for businesses that have proven cash flow but cannot meet the requirements laid out by banks. With a cash flow loan, business owners can invest in their operation, their people, and their own future success.

Want to learn more about cash flow loans and if this is the solution your business needs to grow to its full potential? Contact us today and apply for a cash flow loan from LVRG Funding – the number one provider of small business funding solutions.