![]() ![]() ![]() Unfortunately, it’s fairly common for customers to make late payments, with 87% of businesses reporting that they are typically paid after their invoice due date. ![]() When customers make late payments, those delays can cause real problems. Receiving Late Customer PaymentsĬustomers are the lifeblood of any small business. Be sure to revisit your budget as things change, like as your business expands, for example, or as inflation causes a sharp increase in the cost of goods, and implement a system to properly track all moving parts so you always know where your large expenses are and can adjust accordingly. Remember that a budget is a moving target, and goals can change frequently and quickly. While some small business owners may consider a budget to be limiting, with a properly documented budget in mind, businesses have a financial focus, as well as something to work against when considering what to spend on throughout the year. Small businesses looking to create a budget should create specific and realistic goals, and overestimating expenses (i.e., expecting to pay more for items this year than you did last) will put you at an advantage. ![]() Not Creating a Budgetīudgeting is the first step in getting a real handle on expenses, but in 2021, more than half (54%) of small businesses didn’t have a formally documented one. A line of credit can help cover unexpected expenses, for example, or a loan from the Small Business Administration. In lieu of an emergency fund, small businesses do have other options in a pinch. Set a reoccurring and automatic schedule so you never forget, and deposit the funds into an account that’s solely for emergency purposes. To build your emergency fund, start by figuring out how much you need (how much money would cover your immediate expenses for one month, for example, and then how many months do you want to have saved), and start putting even a small amount away each month with that goal in mind. Small businesses that have emergency funds will be more likely to cover unexpected expenses - like a high tax bill, increase in supply costs or repairs after a disaster, for example - which puts them at an advantage. Surveys show, though, that 17% of business owners say that if faced with two months of declining revenue they would have to close, and other statistics show that 25% of businesses won’t open again after a disaster. Avoiding Emergency Fundsīusinesses - like individuals - need to be prepared for the unexpected. Business owners who understand these will be more likely to avoid them, or at least have a plan for them when they crop up. Luckily, most cash flow issues stem from a few common causes. To do that, though, small business owners and their finance teams need to have a thorough understanding of their current payment processes and debts, as well as a plan for how to handle any potential disruptions in cash flow in the future. Proper cash flow management involves planning for both incoming and outgoing revenue so that your company always has the money on hand that it needs to run. For example, one survey found that over one-third of small business respondents identified “lack of capital” as the number one reason why the business had to close. Unfortunately, capital is one of the biggest headaches small business owners say they face. For any small business to be successful, owners must have a solid understanding of how cash is flowing into and out of the company. ![]()
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