The way your business is going likely varies depending on the month. It’s not common to have a steady flow of revenue throughout every year. However, if you find it hard to pay the bills every month, you may be struggling with cash flow, which might indicate you need to change a few practices. The good news managing invoicing cycles, sticking to a budget, and getting a business line of credit can mitigate these issues.
Free Up Some of Your Own Funds
While it’s not an ideal long-term solution, freeing up some of your own funds could help you move things along until things improve with your business. If you have credit card debt, you might consider taking out a personal loan to pay it off, so you have more money for your business. If you are thinking of going this route, you can look at a guide with more details about this idea.
Manage Invoicing and Payment Cycles
While you might give your customers 30 days or longer to pay you, you may find you need their payment sooner so you can get more inventory or pay your bills. This means you can’t wait until the deadline for them to pay you, so you might need to shorten your terms. Another option is to give a slight discount for paying you earlier.
One way to save money in the short term is by lengthening the amount of time you must pay your suppliers for your inventory. However, waiting too long to pay your bills could negatively impact your credit, and your suppliers may not want to work with you if you don’t have a history of on-time payments with them. Still, you might be able to negotiate with them to extend the actual date the payment is due, or you could make annual payments instead of monthly ones.
Stick to a Budget
If you want to improve your financial management there are many ways to budget for your business, but the important thing is to make sure you are sticking to one. If your expenses and income are relatively steady throughout the year, you may find it is easier to use a monthly budget. But if things are more seasonal, it may make more sense to create an annual budget. This can help you break down the amount you will need to cover your recurring bills. An annual budget is harder to manage and requires you to save money during the months when things are going well so you can pay for things during low-revenue months.
Look to a Business Line of Credit
You may want to consider getting a line of credit if your cash flow is restricted. This gives you funds to spend during the hard months, and you can pay the money back when things get better. However, this is different than a loan because you will only pay for the amount you use, and interest will only be charged on your outstanding balance. After paying it off, the line of credit will be replenished, meaning you can use it again if you need it then.