Keeping Up with Business Operating Expenses

Cash flow can sometimes be a problem with businesses that bill via invoices. The supplies were purchased, the employee completed the work, and the customer has thirty days to pay the bill. Depending on how events unfold, businesses owners may have to struggle to meet payroll or pay their suppliers. Ideally, work is steady and customers pay their bills exactly on time.

Where Problems Begin

Work can wax and wane for many businesses. A plumbing company, for example, may experience a drop in service calls or renovation projects. Construction can diminish greatly depending on the economy. Combine circumstances with a few late paying customers and the cash flow plummets. The question now becomes how does the business owner cover operating expenses until work increases.

Immediate Solutions

A short-term business loan will help owners meet current obligations. There will be interest to pay, but this solution will prevent the business from failing. Contact customers with a balance and make efforts to collect late payments. Liquidate some assets if at all possible. That could be selling a piece of non-essential equipment, or temporarily laying off employees.

Factoring invoices will provide fast cash. Instead of waiting for customers to pay the bill, a lender buys the invoices at a high percentage of value. There are no upfront costs to the owner because the fee will be taken out of the difference when customers pay the full invoice amount. Companies and terms vary so owners will want to research lenders prior to any factoring transactions.

Long-Term Strategies

To avoid the situation moving forward, start to reduce daily operating costs. Small changes can make a significant difference over time. Start with any physical locations occupied by the business. Are utility systems and appliances operating efficiently? There are times when replacing an old heating or cooling system, as well as old appliances, is more cost-effective than continuing to run them.

Check the weather stripping around doors and replace as needed. Make sure lighting is efficient, and caulk any spaces or seams that let in heat or drafts. Check with utility companies to find out if they offer free assessments for business owners. Owners can also look for more info on operating expenses online.