3 Problematic Areas to Analyze If Experiencing Bad Cash Flow

Is your business on the verge of going down? If so, you need to quickly get your business's financial health analyzed to diagnose it for problems. Pay specific attention to inventory control, debt management, and account receivables collection, as these three are among the most common reasons a business finds itself in financial trouble. They all hurt your cash flow, and as you know by now, cash is the blood of your business.

With that in mind, here is how you can address these cash flow issues,

1. Inventory Control

One problem many companies face when it comes to inventory control is that they cannot find the right balance of how much to keep in their warehouse at any given moment. For instance, companies that overstock their products can end up not being able to sell everything. Over time, larger and larger discounts have to be offered to sell all the products, which causes the business to lose money as a result.

That said, finding the right balance is vital when it comes to inventory control. Knowing how much to keep in stock to satisfy customer demand and ensure that enough is in place so that suppliers can send your products on time will take time to get right. However, it is possible and definitely worth the effort. This leads to fewer products sitting around in the warehouse and more getting sold!

2. Debt Management

Every company has debts of some sort. While it may seem like a liability, debt can actually be advantageous in many situations. However, this is only a given if the debt is responsibly managed. Unfortunately, not many companies do so, leaving debts to spiral out of control and consume their finances. 

If you have any ongoing debt that is acting as a massive headache and issue for your business, there are a few things you can do. You can consider consolidating all your debt into one so that you can pay them all off quickly and only worry about paying one. You can also renegotiate current terms, although that may be tough to do for your benefit. Finally, you can also sell your assets to cover these debts.

Keep in mind that before you do any of this, do consult with your accountant for the right solution. This ensures your credit rating is good, allowing access to excellent loans.

3. Account Receivables Collection

Account receivables are what other clients and customers owe a company. However, if they are not collected, this means no access to money in the cash flow, hurting a company's financial standing.

There are many ways you can ensure your account receivables are collected on time. For instance, you can remind clients of the penalties they will incur if they pay late. You can also check your list of customers and eliminate unprofitable ones.

You can also rework how you offer credit in the first place, ensuring that only those with good payment history can access credit. For those with bad credit, you can offer reworked terms to eliminate or minimize the risk. Remember, collecting money in any way is much better than not!

Conclusion

The above aspects of your business are where most cash flow problems arise. If you see that your business lacks cash, have these three areas analyzed. If you discover any issues, be sure to discuss the problem with your accountant. Working together, you will be able to develop an effective solution that will help your business restore its cash flow and grow.

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