Cash Flow Problems Small Businesses May Likely Experience

March 3, 2017
Cash Flow Problems Small Businesses May Likely Experience

Cash Flow Problems Small Businesses May Likely Experience

By Adeniyi Ogunfowoke

Cash or money is important to the proper, effective and smooth running of any business or enterprise.

It is, therefore, safe to say that without money, your business will collapse.

As a result, Jumia Travel, the leading online booking agency discusses some cash flow problems that are likely to affect the smooth running of your business.

This will ensure that you are fully prepared for any uncertainties. It must be mentioned that 90 percent of small businesses or startups fail due to poor cash flow.

Delayed payment

After providing a service, you expect to be paid immediately, this is not the case most times. You offer your service and get paid later. However, this is not good for your business. In fact, if your clients pay very late, your debt profile will steadily rise. To reduce the effect of late payment, set a timeline for your clients or customers to make payment and use your relationship with the manager to encourage him or her to pay you as early as possible. You can also reduce the credit you offer your customers.

Decline in sales

The reduction in sales can have a huge impact on profit. As soon as you notice a decline in sales, you may need to check your marketing strategy again. You can also take advantage of social media. You don’t need to break the bank to boost sales again.

Low profit

Profit is directly linked to sales. You should not be too surprised if your profit has been hit. The Nigerian economy is trying to recover from its first recession in 22 years. Besides, some businesses have declared losses. This is why the business should have savings to cushion the effect of the lack of profitability. Also, you may need to adjust your growth forecast.

Seasonal demands

There are some businesses that are seasonal. Seasonal in the sense that there are certain months there is a monumental spike in turnover and in other months, it will reduce. For example, there is always an increase in hotel bookings during public holidays and the festive period. This is same for transport. You have to plan your cash for this period so that there is no lacuna.

Overtrading

This usually affects small businesses that are just opening a shop. Most times, these businesses invite customers and friends and offer them a good discount to promote patronage. The turnout may be massive and it may affect your cash flow because so many people are taking advantage of the discount. The rule here is to try as much as possible to make your launching very simple and don’t offer any crazy discount.

Adeniyi Ogunfowoke is a PR Associate at Jumia Travel.

Modupe Gbadeyanka

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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