It's no secret that poor cash flow badly affects your...

- Business’s chance of survival

- Productivity

- Sleep and anxiety levels

Running out of cash is the #1 reason for business failures.

Here are the big 9 reasons for cash flow problems - and how to fix them...

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Cash-flow Problem #1: Not Selling Enough

Simple maths of survival. Sales must exceed costs.

In this situation...

1. Aggressively cut costs

2. Protect your margins

3. Put effort into self-proven marketing and sales.

Cash-flow Problem #2: Poor Credit Control

Money runs out fast when you don’t get paid on time.

Fix it by…

1. Invoice asap

2. Create a process for credit control

3. Automate wherever possible

4. Withhold service/goods for late payers

5. Make repeat offenders prepay

Cash-flow Problem #3: Too Many Bad Debts

Bad debts are from people unlikely to ever pay.

1. Stop supplying

2. Chase frequently

3. Go legal

4. Avoid with better credit control

5. Credit check new customers

Cash-flow Problem #4: Too Much Stock

Too much stock is a liability, not an asset. You can’t spend cash tied up in stock.

1. Promote it and get rid

2. Hold a ‘fire sale’ to create urgency

3. Sell for whatever you can get

4. Some cash is better than piles of outdated product

Cash-flow Problem #5: Not Enough Working Capital

Long projects mean you can run out of cash before you finish a profitable job.

1. Set payment terms that work in stages

2. Charge ahead for materials

3. Avoid overstocking

4. Maintain a cash flow forecast

Cashflow Problem #6: Expensive Borrowing

Big interest payments, or big capital repayments, blow big holes in cash flow, too.

Refinance or negotiate better terms for more affordable borrowing.

Cashflow Problem #7: Staff Theft

Far more common than you’d believe.

Prevent or catch it early by…

1. Get control of your numbers

2. Understand where money and stock is going

3. Know when and where the money flows

4. Reconcile cash and transactions

5. Don’t delegate spending

Cashflow Problem #8: Weak Business Model

If your business barely makes a profit, cash flow will always be a struggle.

1. Calculate your breakeven sales

2. Find a more profitable way to do business

Cashflow Problem #9: Overstaffed

Some businesses hire extra staff to ‘improve service’.

Don’t get caught in this emotional trap.

1. Calculate sales revenues ➗ employees

2. Set a minimum sales turnover per employee

3. Same for profit

4. Focus on productivity per employee

9 common reasons a business hits cash flow problems…

TL;DR

1. Weak sales

2. Credit control

3. Bad debt

4. Overstock

5. Working capital

6. Borrowing

7. Theft

8. Business model

9. Overstaffing

If you found this thread valuable:

1. Toss me a follow for more threads on small business hypergrowth → @Lee_Duncan

2. Here’s another thread about winning habits of entrepreneurs you might enjoy: https://twitter.com/lee_duncan/status/1524719322500849666?s=21&t=Xgs0EgDI5vjvAxs87u2yAw