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Is your small business raking in the big bucks on paper—while you struggle to pay your bills on time because your bank account is constantly running low? Cash flow problems are one of the biggest challenges small business owners face. More than 80 percent of small businesses fail because of cash flow problems, Small Business Trends reports. Here’s how to prevent your business from meeting that fate.


Curious what the second big problem small business owners struggle with is? Check it out here.


What is cash flow?

Positive cash flow means you have more money coming into your business than going out. Negative cash flow means you’re spending more than you are bringing in. (Think of it as being overdrawn on your checking account.)

Cash flow problems can easily happen—even in successful businesses. A growing company may need to buy inventory or hire additional employees to keep pace with demand for products or services. But what happens if those customers don’t pay you for 60 days, 90 days, or more—as is common with many corporate or government clients? If you have to meet payroll every month or pay off your inventory in 30 days, you’re in trouble. 48180328_s.jpg


According to an analysis of 20 million invoices conducted a few years ago by Fundbox*, 64 percent of small businesses are affected by late payments.


How to manage your cash flow

When you’re having cash flow problems, your instinct may be to hide your head in the sand. Don’t. Use your accounting app (like QuickBooks or FreshBooks) to create cash flow statements and review them at least monthly. If you’re struggling with cash flow, or you’re going through a busy time, review your cash flow statement weekly or even daily.

Learn more about Account Management from Bank of America

Reviewing your cash flow statements and developing a cash flow forecast can prevent unpleasant surprises. Use your past cash flow statements and your sales forecasts to understand what your cash flow landscape might look like six or 12 months in the future. Having a roadmap of what to expect helps you budget more accurately.


Fast or slow?

In general, your goal is to get paid as quickly as possible, while delaying your payments as long as possible in order to keep cash in your accounts longer. Here are some tips for doing so:

  • Invoice right away. As soon as the product is delivered or the service is performed, send out your invoice.
  • Contact the customer as soon as a payment is late. Use your accounting app to alert you of past-due payments.
  • Automate your own payments so you can pay your bills as late as possible without concern about missing a due date.
  • Use business credit cards to pay your bills when possible.
  • Offer your customers discounts for early payment (make sure this doesn't negatively affect margins).
  • Request a deposit before beginning a job, and/or stagger periodic payments throughout a long project.
  • Once you’ve developed a good track record with vendors and suppliers, see if you can negotiate longer payment terms or adjust your payment due dates so you don’t have too many bills due at once.


Prevent cash flow problems

To keep cash flow problems from cramping your style, always conduct credit checks before you extend credit to a new customer. If you have any concerns about a customer’s ability to pay but still want to work with them, work out a plan such as monthly payments or COD to ensure you’ll be paid for your work.

Finally, have a backup plan. When your business is doing well financially, apply for a business line of credit that you can use in case of emergency. Obtaining a couple of business credit cards will help as well. This way, you have some options for financing if you get into a cash flow crunch.


Learn more:

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*Disclosure: Fundbox is a client of my company.


About Rieva LesonskyRieva Lesonsky Headshot.png

Rieva Lesonsky is CEO and Co-founder of GrowBiz Media, a custom content and media company focusing on small business and entrepreneurship, and the blog A nationally known speaker and authority on entrepreneurship, Rieva has been covering America’s entrepreneurs for more than 30 years. Before co-founding GrowBiz Media, Lesonsky was the long-time Editorial Director of Entrepreneur Magazine. Lesonsky has appeared on hundreds of radio shows and numerous local and national television programs, including the Today Show, Good Morning America, CNN, The Martha Stewart Show and Oprah.


Lesonsky regularly writes about small business for numerous websites and for corporations targeting entrepreneurs. Many organizations have recognized Lesonsky for her tireless devotion to helping entrepreneurs. She served on the Small Business Administration’s National Advisory Council for six years, was honored by the SBA as a Small Business Media Advocate and a Woman in Business Advocate, and received the prestigious Lou Campanelli award from SCORE. She is a long-time member of the Business Journalists Hall of Fame.


Web: or Twitter: @Rieva

You can read more articles from Rieva Lesonsky by clicking here


Bank of America, N.A. engages with Rieva Lesonsky to provide informational materials for your discussion or review purposes only. Rieva Lesonsky is a registered trademark, used pursuant to license. The third parties within articles are used under license from Rieva Lesonsky. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.


Bank of America, N.A. Member FDIC. ©2017 Bank of America Corporation

April is Financial Literacy Month and for the small business owner, that is an especially important topic because, frankly, many entrepreneurs are not especially financially literate. Why is that? Generally, the skills and personality traits that enable someone to start a business are not necessarily the same ones that foster money smarts.


Entrepreneurs are many things – creative, hard-working, enthusiastic, driven, etc. Those are all things that really help in starting a business. But you will notice I didn’t say, “financially literate.” Being good with money is not the same as wanting to create something from scratch. 97369893_s.jpg


But if you want your business to succeed long-term, then you must learn how to be good with the money stuff, too. For example, one of the keys to being financially literate in your business is understanding how to keep your overhead low.


When I was the unhappiest lawyer in town working incredibly long hours for demanding partners, I began to plot my escape. In off hours (what few there were) I would meet with attorneys I knew who had successfully broken away from the corporate firm life and started their own practice. I wanted to know two things:

      • How did they do it?
      • How did they stay in business?


While I heard all sorts of stories and learned many lessons that served me well, the most consistent piece of advice I received was a bit of financial literacy:

“Keep your overhead low.”


Clients and customers come and go. Business goes up and business goes down. The economy booms and busts. These successful lawyers told me that the best hedge against this inevitable business cycle is low overhead.


Here’s how to keep your overhead low:


Cut down on rent. There are many ways to do this:


      • Negotiate (or renegotiate) with your landlord: Reliable commercial tenants are hard to find. That puts you in the driver’s seat. You have leverage. Use it to get your rent lowered.
      • Find new digs: If your present landlord won’t cut a new deal with you, you can rest assured that there are plenty of other landlords who want your business. They will.
      • Go the WeWork route: If you don’t need a full-time office, another great option and easy way to cut your overhead is to consider a collaborative workspace like WeWork. As you may know, these are fully functional and furnished spaces you can rent by the hour, day, week or month, as needed. By not paying for space you don’t use, you save money.
      • Sublease: If you have an office that is not 100% full, or if you have certain hours or days when you have space not being used, consider subleasing that space to help reduce your overhead.
      • Go virtual: I know a guy who recently closed his office altogether. No, he didn’t go out of business, he just sent everyone home to work. They still meet in person once a month, but otherwise they work virtually. And he’s saving about $2,500 a month in rent.


Talk to your vendors: Just as I am suggesting that your landlord might be more willing than you think to  keep you, so too might your vendors. A paying client is a valuable commodity. See if you can get better terms or prices. And again, if they won’t cut a deal, there are plenty of folks out there who want your business.


Cut your marketing budget: There are many ways to market your business today that cost next to nothing. Check some out, adopt a few, and in the process, lower your marketing costs:


      • E-newsletter advertising can be very effective and affordable, too


Buy used: Refurbished computers and used office furniture can be found for a song and often in very good condition. Craigslist is a great resource in that department


Want more information to help you be financially literate?  Check out our Managing Your Finances section, Cash Flow Management Resource Center and the Small Business resources on


Related: Managing Your Finances

Related: Cash Flow Management

Related: Have a question about business financing?


About Steve StraussSteve Strauss Headshot New.png

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business SuccessSteven D. Strauss.


Web: or Twitter: @SteveStrauss

You can read more articles from Steve Strauss by clicking here


Bank of America, N.A. engages with Steve Strauss to provide informational materials for your discussion or review purposes only. Steve Strauss is a registered trademark, used pursuant to license. The third parties within articles are used under license from Steve Strauss. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.


Bank of America, N.A. Member FDIC.  ©2017 Bank of America Corporation

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