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Did your cash flow problems create your business problems?

Cash Flow Problems or Business Challenges – Which Came First?

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Whether or not you deploy invoice factoring or other financing tools to resolve cash flow problems, drill down to the root of the problem to prevent it from impacting your growth again in the future.

Cause or Effect? Exploring the Relationship of Common Business Challenges and Cash Flow Problems

“Access to capital” is commonly cited among the top cash flow problems for small business owners and startups. But often, slow cash flow is a symptom, not the cause.

Earlier, we published an article listing the top ten reasons B2B startups fail – or fail to thrive – during their early years. While “access to working capital” was not explicitly listed among the reasons, many of the reasons that these small businesses failed tie back to cash flow problems in some way. So much so that someone on LinkedIn asked why “access to capital” was not on the list:

“Good info to share. I have read several articles that say the #2 reason for failure is the lack of revenue / cash flow / financing.”

Is inadequate cash flow the cause or just the symptom when things are going sideways in a B2B startup or young business? This is a classic “which came first, the chicken, or the egg?” type of question. It’s easy to point to lack of working capital or slow cash flow as the problem, when actually, cash flow problems are the result of another issue whose roots lie elsewhere.

Here’s another look at the list we shared, along with an analysis of what symptoms might be present within a business experiencing the same type of challenge. We also share some steps you can take to address the challenges.

More than Cash Flow Problems: Warning Signs of the Top 10 Challenges that Derail Startups and Small Businesses

Emotional Pricing and Not Understanding Your Pricing (#1 and #4 on the list)

When goods or services aren’t priced high enough to produce the margins needed for a business to be profitable. Conversely, products priced too high  can result in inadequate sales volumes and revenues required to meet operational needs. Both cases result in low cash flow and an unsustainable business model.

You may be able to fix your pricing strategy by conducting some competitive research or establishing a value proposition that resonates with more buyers. Determine whether there is an adequate number of buyers in your target markets to support a particular product or service. If the market is inadequate, it might be necessary to scrap or table the item for the time being, or find a new market for your product.

Living Too Large (#2 on the list)

Many entrepreneurs become small business owners out of a desire to build a better life for themselves. They often want to enjoy the fruits of their labor as quickly as possible. Low cash flow can be symptomatic of the removal of too much operating revenue by an owner or investors. (I knew a store owner whose spouse would come to the store and take money directly out of the till for personal use. It didn’t take long for the business owner to be forced to sell the business at a fire-sale price.)

Proper financial planning and having transparent cash controls can help to ensure that the business retains the revenues it needs for day to day operations and growth initiatives. Best practices suggest you separate personal and business finances, even as a sole proprietor.

Not Paying Taxes and No Experience in Record-Keeping (#3 and #7 on the list)

Most tax preparation professionals can share at least one story about doing taxes for a small business owner who had failed to set aside money for payroll, state, or federal taxes. Not paying taxes at all, or not paying enough in taxes is a sure-fire way to hurt a small business.

Inadequate or sloppy record-keeping often combines with non-payment of taxes. Both issues can be fixed by working with a professional accountant or bookkeeper in order to ensure that the paperwork is done right and taxes are filed and paid on time.

Shoddy record keeping often hides the root causes of low cash flow. And , it’s important to include projected tax expenses as you calculate margins and set prices for your goods or services.

Lack of Planning (#5 on the list)

Want an easy way to negatively impact your numbers?  Lack of planning.  What can happen? You stock too much or too little inventory, resulting in price reductions or missed sales opportunities.  Too many or too many or too few staff members can make payroll numbers balloon. Materials costs skyrocket with rush charges because you didn’t order raw materials soon enough. Missed deadlines mean lost clients and sales. Some small business owners are inherent planners, others are more inclined to be visionaries. Some see the big picture, others the details.

One important thing for any business leader to remember is that it’s rare for any one person to have all the skills needed to do everything well. Solve this challenge by hiring to your inadequacies, finding good mentors and recognizing where you need help. Pull your team together to lean on each other’s strengths.

The bottom line: If planning in many or even just one vital area of your business is not your strong suit, don’t be afraid to ask for help.

No Understanding of Financing and Inadequate Borrowing (#6 and #10 on the list)

Meet with a business finance expert as you launch your organization and as you grow. A specialist can help to ensure that your finances will be correctly set up and understandable. Clarity in this area can help you identify problems as they emerge, before they hurt your business, and while there is still time to act to resolve them.

Additionally, it’s important for small business owners and entrepreneurs to understand that there are financing alternatives available that can help resolve common cash flow challenges. For instance, Corsa Finance partners with business financing professionals who can help small businesses with low or slow cash flow. Options include cash flow loans and invoice factoring that allow companies to “speed up” collection of customer invoices in order to create more consistent cash flow and take on new business more quickly.

Poor Credit Granting Practices (#8 on the list)

As with setting prices, organizations can make the mistake of extending terms that are too generous.  Alternatively, if payment terms are too tight, customers may look for competitors with more lenient payment options.

Good news for companies that invoice their customers after delivering goods or performing services! Invoice factoring can alleviate this challenge altogether. When companies factor invoices, they can receive payment the same day the invoice is generated, without waiting for customers to pay. The factoring company will do the waiting while you’re growing your business.

Expanding Too Fast (#9 on the list)

When organizations try to expand too quickly, they often deplete resources (including working capital) to the point that the business may have trouble meeting operating expenses. This is another instance where simply working with a financial  expert and creating a thoughtful growth plan can prevent the problem from occurring.

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Get more information about speeding up cash flow:

8 Ways Invoice Factoring Can Help You Grow Your Business Faster

8 Ways Invoice Factoring Can Help You Grow Your Business Faster

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Is lack of working capital a problem? Grow your business faster with a financing tool that speeds up cash flow.

Business Cash Flow Financing – 8 Benefits of Invoice Factoring

Few things are more frustrating in business than watching opportunities pass you by because of a lack of working capital. In fact, lack of working capital is repeatedly cited as one of the main problems business owners face when trying to grow their business – or even just keep it afloat.

Having your organization’s growth constrained by a lack of working capital can be especially frustrating when you have assets you can’t access, such as outstanding receivables, and you find yourself waiting for customers to pay so you can take on new business. If a lack of working capital is keeping your business from growing or cash flow is a problem, invoice factoring could be an ideal cash flow financing tool for your organization.

8 Ways Invoice Factoring Can Help You Grow Your Business Faster

You can access the working capital locked up in outstanding invoices by factoring invoices instead of chasing customer payments. Having this working capital in hand, instead of on the books, could be the ideal business financing tool to enable you to:

  • Take on new business more quickly
  • Service larger customers
  • Purchase additional equipment, facilities or real estate needed to grow, expand or hire additional employees
  • Repair or replace aging or deficient assets
  • Improve cash flow to maintain a more even, predictable flow of money to meet operational expenses and fund payroll
  • Engage in strategic marketing and business growth initiatives
  • Negotiate discounts from your own suppliers or vendors
  • Extend more favorable terms to your customers to gain an edge over the competition

Our financing tools are especially appropriate for organizations that want to grow but find that cash flow is not keeping pace with operational needs. Low cash flow often creates difficulty in taking on new projects, new customers or larger accounts not because they aren’t profitable – but simply due to lack of working capital. Factoring can be used as a financing tool to unlock working capital that would otherwise be tied up in customer invoices for weeks, or even months.

Use our invoice factoring calculator to estimate the amount of working capital you could unlock by factoring unpaid customer invoices:

Our team has years of experience in factoring for a variety of industries, and now we are putting that experience to work helping our clients get tailored invoice factoring agreements, so they can maximize the benefits of this business financing tool.

We invite you tap our expertise. We will work with you to come up with a flexible plan that is customized to the financial needs of your business and the way you do business. Here are some of the advantages of factoring with Corsa Finance:

  • No long-term contracts or factoring minimums – factor only when you want to, and only those invoices you choose
  • No application, due diligence or credit check fees
  • No notification, funding or reserve release fees
  • Free funding on advances as soon as the same or next business day
  • Competitive advance rates – as high as 90 percent
  • Competitive factoring fees – factoring fees as low as 5 percent for small invoices or lower for larger balances
  • Choose full recourse, white-labeled non-notification factoring, or non-recourse factoring with additional financial protections
  • Flexible options – retain control of your own accounts receivables billing or let us do the work
  • High level of customer service to you and your customers – we want to earn your business and referrals!

When you think about all of the ways you could be growing your business if only you had access to the money locked up in customer invoices, the idea of using a financing tool that can expedite cash flow becomes even more compelling. We invite you to apply for a free, no-obligation invoice factoring proposal (even if you’re already working with another factoring company and just want to compare).

 

5 Small Business Superpowers Big Rivals Can’t Touch

5 Small Business Superpowers Big Rivals Can’t Touch

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It’s not always about growing to the next level. Some of the small business superpowers your not-so-big business has are things larger competitors lack, which might mean staying small is better for your organization.

Mergers, Acquisitions and Partnerships – Oh My! 5 Benefits of Keeping Your Small Business Small

If it seems like a lot of companies got bigger by joining forces in the past couple of years, it’s because they did. Deloitte’s Merger and Acquisitions Trends report for 2019 found that 79 percent of responders anticipated they would close more deals over the next 12 months, up from 70 percent in 2018. In addition, more than 80 percent planned to sell off assets in 2019, up from 70 percent the year before.

It can be difficult to watch social media feeds and newswires light up with stories of larger competitors making acquisitions, merging with other companies and forming partnerships for lead acquisition, especially when you know that there are things your small business does better.

Rather than worrying about competing on scale, it might be smarter to leverage those things a small business can do that larger rivals cannot, to make your business more profitable without actually getting bigger. Since you might not know how to leverage these small business superpowers to outpace bigger rivals, we also included a few tips to help you turn advantages like these into growth.

5 Small Business Superpowers Big Rivals Can’t Touch

1. Access

Unless they go on a reality show like Undercover Boss, most CEOs and executives in large organizations have little contact with real customers on a day in, day out basis. They don’t have a chance to engage in two-way dialogue, collect first-hand feedback about the customer experience or find out what customers wish the brand would do next.

Take every opportunity to listen when customers complain, ask questions, or make suggestions. The insights they provide can tell you exactly what you need to do to make your business better, more profitable and guide your choices when it comes to adding to new products and services.

2. Accountability

In a big organization responsibility for mistakes can be passed along until a furor dies down, and accolades for success don’t always trickle down to the employees who really made the difference. For better and for worse, a small business offers their customers accountability and gives every employee a chance to shine.

Leaders who aren’t afraid of taking responsibility for mistakes, missteps and misfires often earn the respect not only from customers, but employees as well. Take responsibility for the mistake and make the solution happen. Worry about tracking the details back later to ensure product or service performance in the future. Be generous with praise. Make sure that everyone on the team has a chance to shine and understands that the success of the one can only ever happen as a result of the effort of the whole.

3. Agility

Bureaucracy, processes, committees and getting the-powers-that-be to change direction or add new projects mean that big companies will almost always take longer to react to marketplace changes and emerging opportunities than a small business. A small business can react and make course corrections quickly. They can communicate almost immediately with all staff who need to make adjustments. They can move resources and redirect efforts in a short period of time when new opportunities emerge. These small business superpowers enable smaller companies to move faster than big ones.

Agility isn’t a verb; rather, it’s a passive state of energy. A small business that prides itself on agility but never takes action is wasting this small business superpower. Make sure that you have a process for discovering and evaluating suggestions, ideas and marketplace changes so that when opportunity strikes, you can strike right back.

4. Simplicity

As companies get bigger and bigger, it’s not just their offices that start to look like a maze. Trying to figure out who to contact with a question or when a new product or service will hit the floor can be a job in and of itself. A small business can keep things simple. From processes to communication channels and corporate announcements, customers and employees can feel confident that they are in the know about where to go and what’s coming next.

The routes might be clear, but they still need to be mapped. Make sure that you establish methodology for tracking and reporting stats and progress to the team on a regular basis — and then do it — so that everyone knows what they need to do next.

5. Consistency

Big companies are often stretched in many different directions, so much so that departments could even end up working to cross purposes or unknowingly undermine one another with prospects and customers. A small business has the luxury of finding and focusing on a few or even one common purpose. Employees not only understand the mission but can work together to achieve the goals with a minimum of disruption, since communication is practically instantaneous, everyone can be apprised of the status of all the projects underway at any given time.

The more consistent a brand experience is, the stronger the impression can be; but remember that a consistently boring experience might be just as bad as a negative one. Decide what type of customer experience your brand should deliver and what you will do to get it done. Ensure that all staff have a clear understanding of how what they do impacts and have the ability to improve the customer experience.

Regardless of size, your company has small business superpowers big competitors can’t replicate. The question is, have you discovered them, and how will you use them for good?

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We offer small business invoice factoring, a financing tool you can use to expedite cash flow and even create competitive advantages.

Ask us for a free, no-risk, no-obligation small business financing proposal. Get immediate answers and get access to working capital within days of approval – or even faster.

business growth signs

7 Signs Point to a Real Need for Business Growth

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Complacency is a trickster; don’t fall for it. These seven signs clearly indicate that now is the right time for business growth.

The Time is Right – 7 Indications that Business Growth Should Be Your Top Priority

Complacency is a trickster. Not only does it creep up on us unawares, it also creates blind spots, leaving us open to missing opportunities or warning signs. If one or more of these seven clear signs that point to the need for growth apply to your organization, it might be time to prioritize marketing and operational strategies that can help you grow your business.

7 Characteristics of a Business Needs to Grow to the Next Level

  1. Benchmarks hit – or missed.

It is said that Alexander the Great wept simply because he believed there were no new worlds to conquer. If you have hit the goals you set for your business, it’s time to set new ones. Conversely, if you have missed goals and benchmarks that you anticipated reaching by this point, it could well be that your business needs to grow to meet them.

  1. Cash flow challenges. It’s common for a business to experience cash flow challenges from time to time; however, if your business has a track record of coming up short when it comes time to meet operating expenses or payroll, or you do not have the money you need to expand – or even replenish – inventory, then it is very likely that your business needs to grow in order to enjoy more stability and sustainability.

At Corsa Finance, solving business cash flow challenges is our specialty. Clients use our invoice factoring services to speed up cash flow in order to more easily:

  • Meet operating expenses and payroll
  • Finance business purchases, repairs, and renovations
  • Cover unexpected expenses
  • Maintain cash flow during cyclical or seasonal lulls
  • Replenish or expand inventory
  • Add new products or services
  • Expand by adding location square footage or opening up new locations
  • Execute strategic marketing campaigns or pay for new marketing tools
  • Hire temporary staff seasonally or while growing
  1. Employees are stretched too thin – or becoming bored.

One sure sign that you need to grow your business (so you can hire more employees) is when you and one or more of your staff are stretched too thin, wearing too many hats, or juggling too many responsibilities – often with the result that tasks aren’t getting done on time or they fall completely through the cracks.

On the other hand, employees who are bored, disengaged, or disinterested may be telling you that it’s time to grow your business. Adding new projects and challenges to employees’ jobs may be just the thing to keep them interested and engaged with your business.

  1. There’s new technology on the horizon.

Your business may need to grow in order to keep pace with technology advances in your industry; conversely, the emergence of new technology may be providing you with new ways to grow your business.

  1. Customers losing interest or shopping around.

If customers believe that they know all there is to know about your business or have experienced all the benefits your products and services offer, they may begin to lose interest or shop around to see whether competitors may have something more to offer.

Keep customers interested by growing your business (expanding or changing your product or service lineups) and engaging in marketing campaigns that create intrigue, incentivize loyalty, or stimulate word-of-mouth marketing.

  1. Your industry is evolving.

Technology is not the only industry innovator that may make it desirable for your business to grow. Finding more efficient ways to do business, new ways to promote a business, or identifying new target markets can all mean that it’s time for your business to grow beyond its old boundaries.

  1. Competitors are gaining ground.

Whether in the form of direct competition or indirect competition (e.g., there are substitutes or alternatives to your business or its products or services), when competitors begin to eat away at market share, it’s a sure sign that your business needs to grow and evolve, as well.

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Do you need improved cash flow for business growth?

Here are four things that must be part of your plan for business growth:

  • Clear vision, understandable, well-defined mission, and a strategic marketing plan
  • The right people on your team
  • A plan for how infrastructure will evolve with business growth
  • Working capital and business financing tools

We provide receivables invoice factoring services that can be used for business growth and sustainability.  We would be happy to help you determine if factoring can help your business or provide you with a no-risk, free proposal for business financing that could take you from approval to funding in a few days – or even faster.