Common cashflow issues when setting up a small business
Setting up a small business is an empowering career choice. It’s often a chance to turn your passions or talents into a livelihood – you’ll be your own boss and create something meaningful.
But as exciting as the journey is, it’s not without potential hurdles to overcome. One of the main challenges small business owners face is managing cash flow. For many entrepreneurs, cash flow issues can feel like an uphill battle, threatening to derail even the most promising ventures. In this guide, we’re going to look at three of the most common issues – and what you can do to solve them.
Tracking spends
Tracking where your money goes is crucial for managing your cash flow. Losing sight of small, recurring expenses – like software subscriptions or miscellaneous supplies – can quietly drain your resources over time. Make a habit of reviewing all your spending regularly to catch waste and avoid surprises.
One of the best ways to do this is to use a finance tracker, such as Fina, where all of your expenses are in one place. Using such a tool gives you a clear picture of your finances and helps prevent cash flow problems down the line. After all, successfully managing your business finances boils down to vigilance and maintaining a diligent record of all your expenditures should be non-negotiable.
Unexpected costs
No matter how well you plan, unexpected expenses, such as equipment repairs or surprise fees, are inevitable. Even a small, unplanned bill can disrupt your cash flow and force tough decisions.
First things first, in the early stages of your business set up, make sure you research dedicated information for small business owners on everything from compliance to financial planning and legal fees. This should help you anticipate potential costs upfront.
But nonetheless, to stay prepared, build an emergency fund with at least a few months’ worth of core expenses. Treat contributions to this fund as a regular business cost and this cushion will help you handle surprises without derailing your business.
Delayed payments
Late payments from clients can create major cash flow headaches, often leaving you struggling to pay your own bills. So controlling the flow of incoming revenue by addressing delayed payments before they occur is essential. To minimize this risk, clearly state payment terms up front and include due dates on every invoice.
Again, tools like invoicing software can be helpful because they can automate reminders and make payments easier for clients. Offering small discounts for early payments or requiring deposits for large projects can also encourage prompt payment and keep your cash flow steady.
Financial stability for long-term success
Launching a small business is a journey filled with purpose, but financial stability is the foundation upon which long-term success is built. By proactively addressing these issues, you’ll move from a reactive state of fire-fighting to a position of strategic control. That’s a real business strength.
Each issue we’ve outlined has a clear action which can drive improvements: reviewing your expense tracking system, setting aside your first contribution to an emergency fund, and refining your invoice process. So embrace the tools and habits that bring clarity to your finances today.