Where newbie business owners think of profits, successful entrepreneurs think of cash flow. Achieving a strong and, more importantly, consistent cash flow is a serious challenge for all businesses, especially newer ones that have yet to gain market share. Not having the cash flow you need can easily lead to your business losing liquidity, consequently putting it at risk of becoming insolvent.
Fortunately, cash flow issues tend to be common and predictable, with several well-documented solutions. If your SME (small- to medium-sized enterprise) has problems with its liquidity, check for the issues below and see if you can apply their most common fixes.
1) Poor Cash Reserves
As a rule of thumb, businesses need to maintain a reasonably sized cash reserve to prevent operational gaps and cover emergency expenses. However, many businesses maintain very tight or non-existent reserves in favor of reinvestment into their operations. While this is a legitimate approach, even small emergencies can force them to borrow cash, creating chronic liquidity issues.
Maintaining a cash reserve that can sustain operations during difficult times is easier if your business banking solution offers high-interest rates. For SME business banking that maximizes funding, Philippine-based entrepreneurs are increasingly relying on Maya Business Deposit. While the Maya Business Deposit savings product is widely used by large businesses, its convenience and industry-leading 2.5% per annum (p.a.) interest rate have made it a popular small business banking solution as well. Whether you need a serious way to maintain your liquidity or just want convenient online business banking with free PesoNet and InstaPay transfers, Maya Business Deposit helps you take your funds further.
2) Uncollected Accounts Receivable
Though offering credit is a good way to boost sales and attract loyal clientele, it can also expose your business to serious cash flow risks. If you do want to offer credit, you have to be selective and you have to be prepared to collect.
Good credit practices demand a judicious approach, involving a careful selection of clients and a thoughtfully developed system for efficient debt collection. Striking the right balance may even serve to boost your cash flow over the long term by increasing customer loyalty and customer lifetime value.
3) Excessive Debt Payments
Business loans are often necessary for enabling expansion. However, in some circumstances, the burden of repayment can deplete your cash reserves and become a serious hindrance in your day-to-day operations.
There are several strategies for making loan repayments more manageable, including consolidation and renegotiation. Regardless of what strategies you employ, you need to make sure that your creditors get paid on time. Thankfully, with Maya Business, you not only get best-in-class solutions for small business banking online but you also get a highly convenient bulk payments tool. Maya Disbursements makes it simple to automate your loan payments, which means it will be easier for you to stick with your chosen repayment strategy while also freeing up valuable resources for growing your business.
4) Shifting Customer Preferences
It’s normal for customers to come and go. But if they’re leaving because of a general shift in the market, this could cause a serious impact on your sales, negatively impacting both your cash flow and long term profitability.
Specific solutions can differ depending on the nature of the market shift but a reassessment of your marketing and offered customer experience will be necessary. Check out this resource on creating genuine customer loyalty to get ideas on how you can better cater to your customers.
5) Overinvestment in Inventory
Purchasing too much sales or production inventory can seriously deplete the cash available for your other critical business operations. Not only is there a cost associated with purchasing and warehousing products but there are also additional expenses related to maintenance, insurance, and potential obsolescence.
To avoid inventory-related losses, invest in modern enterprise resource planning (ERP) systems that offer you full visibility of the items you have in stock. Using electronic cash registers (ECRs) that integrate with your ERP will also give you the ability to view accurate sales inventory figures in close to real time. Using point-of-sale solutions that integrate into ECRs like the Maya Terminal should also further help provide a clear picture of both inventories and general sales trends, boosting your cash flow and giving you clues on where to take your business next.
6) Poor Bookkeeping Practices
Bad bookkeeping will make it difficult to identify how your business is losing money. Hiring a competent bookkeeper and having a low tolerance for sloppy recording will help you maintain a more accurate picture of your finances, allowing you to identify problem areas for your business’s cash flow.
7) Ineffective Pricing
Bad pricing can severely limit your profit margins and may even keep you from generating a surplus. This can be a serious issue for smaller businesses that choose to compete with price, as they won’t necessarily have the scale or capabilities to shift larger volumes of stock. Implementing proper cost control, reevaluating your business model, and improving your market intelligence practices will be necessary to overcome this common pitfall.
8) Production Waste
Lastly, inefficient production burns through materials, time, and energy, leading to higher operating costs and decimating your margins and cash inflows. To mitigate this issue, consider doing process audits and implementing different strategies to minimize waste. Check all expenses related to production, from utilities to insurance, and brainstorm ways you can save resources without impacting product and service quality or employee health. Over time, these savings should help you raise your baseline cash flow without creating any negative business impacts.
Master Cash Flow Management with a Maya Business Deposit Account
For fast, secure, and transparent business banking, Philippines SMEs choose Maya Business Deposit. With an interest rate of 2.5% p.a., Maya Business Deposit grows business funds 4x faster compared to other banks. Create your Maya Business Manager account for better business banking online.
After signing up, you’ll also be entitled to the Maya 1-2-3 Grow bundle. Maya 1-2-3 Grow lets you enjoy a 1% MDR (merchant discount rate) discount on all QR Ph transactions for 3 months upon onboarding. This effectively gives you PHP 14,600 in transaction fee savings for every PHP 1 million in QR Ph sales, effortlessly providing stronger cash flows for your business.
As part of the Maya 1-2-3 Grow bundle, you can also take advantage of opening a Maya Business Deposit account and using it as your settlement account. With its unrivaled 2.5% p.a. interest rate, your business funds will gain PHP 25,000 in interest each year on a PHP 1 million deposit.
Signing up also entitles you to a Maya Flexi Loan offer of up to PHP 2 million within just 3 months, giving you instant liquidity and more ways to strengthen your cash flow. To increase your loan offer, simply rely on Maya Business as your primary processor for all wallet and card payments. The more you use Maya Business solutions, the better the loan offer.
Send in your Maya Business Manager application today for stronger cash flows with Maya Business Deposit and to enjoy the amazing perks and privileges of Maya 1-2-3 Grow.
