What to know about small business cash flow problems

25 August 2020
Small business cash flow problems

If you are reading this article is because you want to learn more about small business cash flow problems and their solutions. Why more than 60% of small businesses close their doors within three years?

We have summarised below the 5 main reasons why small businesses fail within the first three years. Many business manager have great ideas but poor financial skills which could be a huge problem to turn the business profitable. Small business loans could help to go through temporary shortfall.

1) Poor cash flow and financial management will kill any small business.

Businesses can lose money year on year but a business will only run out of cash once. Many new business owners do not dedicate enough time to ensuring cash in and out of the businesses is managed effectively to ensure the business can service its ongoing commitments.

2) A business has to offer either a unique value offering either by providing their product or service better than their competitors.

The price point also must be spot on. Too cheap and the business will not make a profit and too expensive and the business will not win clients and new business.

3) Poor leadership or management skills in a business can also lead to a business failing.

This impacts on employees lacking motivation and direction, clients receiving inadequate service and the business losing direction.

4) Sometimes it can be as simple as the business model is unprofitable.

That could be due to incorrect product pricing, poor location or too high business overhead. The revenue of the business must support both the cost of sale and the admin overhead of the business and at the same time leaving a profit for return and reinvestment.

5) Growing too quickly in an unsustained manner can also cause businesses to fail.

This is often caused by a lack of cash to support the growth, but can also be caused by a lack of management support to handle the business growth.