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There are many times when small businesses don’t make it in the long run and eventually shut down. If the owner does not have a good business plan, projects soon get marred by debts and cash flow demands. Business strategies need to be formulated early, keeping long term goals in mind. Entrepreneurs who don’t understand this often have to face bankruptcies.
Small business owners can maintain positive cash flow by limiting their debt. Here are some guidelines that can help you steer clear of bankruptcy.
• Reduce debt – A lot of small businesses have to take loans to begin working. That is fine as long as the amount is not excessive. Financial or personal loans should be used just to get the business started. Accessories should be bought later. The smaller your debt obligations are, the higher your cash flow will be. This is the best way to avoid bankruptcy.
• Accept credit cards – When you accept credit cards, you open up more possibilities and you can receive well-timed payments from customers as well. There are simple solutions such as PayPal and Square that don’t have the restrictions that some of the larger merchant services companies do.
• Use a collection agency – Because all businesses are susceptible to bad debts, it is best to move the accounts of non paying customers to a collection agency. This was you can focus on bringing in new paying clients while someone else is recovering your losses.
• Internet marketing – Internet marketing is a great way to market your business and to reduce your expenses and workload. A website is not just a marketing tool, but it can also handle customer queries, make appointments, and take orders (i.e. collect money).
• Negotiate with lenders – Your creditors don’t want your business to become bankrupt. Once you go bankrupt, they get little or no money, so try to negotiate with them and push back the deadlines a bit. The key here is being up front with them and letting them know what’s going on before they have to ask.
• Get MCA (Merchant Cash Advance) – MCA is good for small businesses that want short term finances. MCA providing companies verify your duration in business along with monthly sales volume before sending you funds. The time taken for processing MCA is about a week. The amount and interest are recovered by the company as a daily percent of the credit card sales you make.
• Get investors – Sometimes close friends or relatives might be interested in your business and they might get ready to invest something in it. Such a deal makes a business safer, but you should go for it only if you think it can work out.
• Find Out if Invoice Factoring can Help You – Not every business can benefit, but if you have accounts receivable that you can collect on, you might be able to sell those receivables to an invoice factoring company. These are companies that are cash rich and will advance you a percentage of the money owed on your invoices to help you solve your short term cash flow needs.
Instead of reading through this list and reasoning that these things don’t work for you, consider it as a tool to avoid bankruptcy. Follow the points you can, and your business will be stronger. If you need help, get in touch with a good business coach who can help analyze where you are in your business and keep you on the right side of the bankruptcy lawyers.