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Common Causes Behind Poor Cash Flow Management

A stressed business man

Poor cash flow management creates many problems for businesses, and 82% of them even fail. A healthy influx of cash is the key to any company’s success, regardless of the industry. You shouldn’t fall behind on important bills, should have access to quick funds for investments, and pay your employees on time. Therefore, it’s essential for businesses to learn efficient cash flow management.  

Managing a healthy cash flow isn’t complicated and most issues arise from easily avoidable causes. As a leading working capital solutions provider in NYC, we have discussed common causes behind poor cash flow management.  

Late Payment Culture

The late payment culture is the major cause behind poor cash flow management, even more so for small businesses. Delayed payments from clients reduce cash inflows and increase your accounts receivables. If your clients have the habit of making late payments, you should start taking automated credit card payments.

Poor Financial Planning

Many small or medium-sized businesses don’t follow a disciplined approach when planning finances. This can lead to cash flow issues. Your financial planning should include realistic and detailed forecasts, budgeting, regular review and updates of crucial documents, and other important aspects. Following a rigid approach will help you foresee potential cash flow issues so you can take prompt action like taking out a business loan.

Declining Sales

Another common cause of cash flow shortages is declining sales. It could be due to competition, low product quality, economic conditions, or poor customer service. If your operational costs become equal to your sales, you will soon find yourself in a cash flow crunch.

 You may also face the same issue when your profit margin has decreased (even if your sales aren’t down). It’s important to regularly review your business’s gross profit margin to adjust the pricing and expenses accordingly.

Increased Unexpected Expenses

Unexpected expenses include replacing faulty equipment, frequent repairs, natural disaster, etc. At first, it might not affect your finances but over time, your expenses increase to an unsustainable level.

You must take vigorous action to create a sustainable cost structure and track expenses on a regular basis. Another wise step would be to project future expenses and including unexpected repairs or other costs. Having a backup plan will help you overcome cash issues.  

Person taking out a loan

If you’re experiencing cash flow issues and need access to quick funds, apply for a loan at Whitestone Fund. We offer fast line of credit loans in NYC, merchant cash advances in NYC, working capital loans, and many other services. Our terms are flexible and we have over 95% loan acceptance rate. Contact us for details.

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