How to Tackle Top Financial Challenges for Small Businesses

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There’s no shortage of financial challenges for small business owners. As soon as you tackle one thing, something new is sure to pop up. Whether you’re concerned about the financial challenges of rapid growth, lean times, or everyday startup woes, you’re likely to face the situations outlined below at some point. Give us a few minutes, and we’ll walk you through how to tackle them like a pro. 

Poor Visibility and Financial Planning 

How to tackle top financial challenges for small businesses

When you have clear visibility into your finances and plan ahead, it’s much easier to weather even unexpected issues. 

  • Equip: Make the most of accounting software like QuickBooks, Xero, and Zoho Books. They can automate recurring tasks, make it easier to tell what’s happening with your finances, and help you avoid common bookkeeping mistakes. 
  • Forecast: Financial resilience begins with understanding where your business stands today and where it’s expected to be tomorrow. Leverage financial forecasting tools to understand your cash flow, expenses, and more, so nothing catches you by surprise and you’re better prepared for what’s to come. 
  • Budget: Create a business budget that aligns with your goals. This will help you allocate resources more effectively and allow you to spot wasteful spending.
  • Save: Make sure you have emergency funds set aside. Treat your savings account like a payable and drop a preset amount into it on a recurring basis. Even if it’s not much, it can help offset unplanned expenses.

Managing Business Expenses

As costs continue to climb and margins thin, managing business expenses can seem like an uphill battle. However, there are several strategies that help.

  • Keep Overhead in Check: Ongoing expenses that support operations but don’t generate revenue can quickly pile up as your business grows. To keep overhead costs in check, leverage technology to minimize labor costs, be mindful of stocking excess inventory, and track your costs carefully.
  • Be Methodical About Cutting Costs: Leave no stone unturned when exploring cost reduction strategies. Negotiate with vendors, outsource non-core functions, and find ways to optimize your processes. 
  • Consider Profitability, Not Just Savings: Most budgeting tips involve making cuts, but fail to mention that cutting the wrong things can hurt your business overall. Make sure you’re maximizing profitability, even if that means leaving some expenses intact.

Slow-Paying Customers

Just 42 percent of B2B invoices are paid on time in the U.S., according to Atradius. Nearly one in ten is ultimately written off as bad debt. Despite how common this problem is, though, you can still influence payment timelines, unpaid invoices, and how much they impact your company.

  • Reduce Net Terms: Most businesses offer Net 30 or Net 60 payment terms, meaning the customer has 30 or 60 days following the generation of the invoice to pay. Even though these are generous terms, and the concept is essentially the same thing as offering an interest-free loan to customers, people still wait until the last minute and beyond to pay. Shorten your payment window as a first line of defense. 
  • Follow Up: One of the most effective strategies for dealing with slow-paying clients is to provide strong service after the sale. Send reminders just before payments are due, on the due date, and right after. When you realize a customer has missed their due date, reach out to find out why. If there is an issue with the service or invoice, fix it right away. If the customer says they’re unable to pay, see if you can work out payment arrangements to get at least some of the funds now. 
  • Factor: To skip the wait for customer payments entirely, consider invoice factoring. With factoring, you sell your unpaid B2B invoices to a factoring company like Charter Capital. The factoring company then collects payment for you, so you not only get upfront cash but are free from chasing invoices. 

Inconsistent Cash Flow

One of the most common financial challenges for small business owners is inconsistent cash flow. You might experience inconsistent cash flow if you’re running a seasonal business, have slow-paying customers, face rapid or declining growth, or struggle with inventory management. These shifts in cash flow make it hard to predict your finances and can show up in various ways throughout your business, like being unable to pay vendors or cover payroll. Most concerningly, 82 percent of business failures are tied to cash flow management issues, according to Forbes. 

  • Avoid Common Mistakes: Some of the most common cash flow management mistakes include things like paying liabilities too early and improperly budgeting for taxes. These can drain your business before you realize you have a problem. 
  • Apply Best Practices: If you want to improve cash flow, make sure you’re monitoring it. Be selective about which customers you extend credit to and ensure you’re billing accurately and promptly. 

Limited Access to Capital

If the first thing that comes to your mind when you hear “business financing” is “small business loans,” you’re not alone. In fact, more than half of all small business funding applications are for business loans or SBA loans and lines of credit,  according to the latest Small Business Credit Survey. Yet, less than 40 percent of business loan applicants are fully approved. 

Thankfully, there are other ways to obtain financial support for businesses. For instance, if you’re looking for working capital options, invoice factoring can help. As mentioned, this is essentially an advance on your unpaid B2B invoices. Because it’s money you’ve already earned and not a loan, there’s no interest accrued and no debt to pay back. Best of all, most businesses qualify because approval is based on your customer’s ability to pay, not yours. 

Get Help Tackling Financial Challenges for Your Small Business

With decades of experience and specialized expertise in industries like trucking, oilfield services, staffing, and manufacturing, Charter Capital offers unprecedented service, competitive rates, and same-day funding. To explore how factoring can help you tackle your financial challenges, request a complimentary rate quote.

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