3 Signs Your Small Business Has A Cash Flow Problem

As defined by the Business Development Bank of Canada (BDC), “cash flow measures how much cash a company takes in versus how much it expends. More cash coming in than going out means the cash flow is positive. If the opposite is true, the cash flow is negative. A business is considered healthy when its cash flow is positive for a prolonged period of time. Even profitable businesses, however, can experience short periods of negative cash flow.”

Cash flow is also often defined as the lifeblood of a business. Needless to say, a poor cash flow can significantly impact a company’s bottom line. How are things going with yours?

Here are three signs your small business has a cash flow problem:

1. You can’t make timely payments to your suppliers.

Are you finding it difficult to pay your suppliers on time? Struggling to meet payment deadlines is a clear sign that you don’t have enough cash coming in to cover your expenses. When you make late payments, you also strain the relationships you have with your suppliers and other partners. This can hamper your ability to negotiate more affordable prices and extended payment terms. In the long run, you’ll likely pay higher costs and may even incur penalties.

“Payment practices can indicate how strong or weak your relationship is with your suppliers,” notes Elizabeth Lavelle of Enable Software, “Paying on time, or even sooner than expected, builds trust with your suppliers and increases suppliers’ confidence in you as a business partner. Building a reputation for making supplier payments on time, makes you an attractive company to do business with.”

2. You’re borrowing money to cover your expenses.

Naturally, the name of the game is to turn a profit, not spend more money than you’re making. Do you find that you have to utilize your credit cards or lines of credit to pay for your expenses? Using credit may work as a short-term solution. However, if you’re unable to pay off your credit providers, you are just putting yourself deeper into debt. When you’re accumulating earnings at a good rate, you can pay off your creditors and avoid hefty interest charges.

“Personal credit cards generally charge much higher annual interest rates on balances carried month to month than the interest charged on a business loan,” warns the BDC, “Those interest charges can become a serious issue for your business if the balance owed keeps growing on your card.”

3. Paying your employees is putting a strain on the business.

Obviously, paying your employees is a non-negotiable part of doing business. As an employer, it is mandatory your payroll schedule is timely and accurate. If this is a problem, you are certainly having cash flow issues. However, they may be the least of your worries. Imagine the despair your team of workers will feel if you don’t pay them on time. It will certainly impact employee morale, increase employee turnover and hinder productivity at your place of business.

As reported by Talent Canada, a 2021 Canadian Payroll Association Essential Benefits Survey found that “nearly four out of five respondents reported consistent and accurate pay to be an essential benefit of employment that they would not work without.”

For many years, Synergy Merchants’ unique merchant cash advance program has helped small businesses to improve their cash flows. Please don’t hesitate to call us at 1-877-718-2026 or email us at info@synergymerchants.com to learn all about it. You can also apply online for a free, no obligation quote!