Cash flow is a perennial challenge for many small businesses. The money comes in, but not always when it is needed. Bills, payroll, and inventory costs can’t be put off. One of the largest reasons owners feel pressure is that they don’t have this matched up.
In this area, a fractional CFO can really make an impact. Unlike a bookkeeper or accountant, they are strategic. They also predict the cash flow, prepare for rough patches, and direct financial decisions. This provides business owners with canny tools for making good decisions ahead of a crisis.
Late Payments and Unpredictable Income
Another major source of cash flow pressure is customers who drag their feet with payments. Small businesses typically are willing to extend credit or allow flexible terms, but this can create lags in income. Service jobs also generate spiky income. There are strong months, and there are slow ones. Without a game plan, the peaks and valleys can make it difficult to cover fixed costs.
Rapid Growth Without Planning
Growth sounds great, but growing too quickly can suck cash. Bringing on new employees, purchasing additional inventory, or opening a new store all require up-front money. When sales do not scale the same way, cash flow can shrivel. A fractional CFO just helps to keep things in balance, growth-wise and financially, so that expansion doesn’t outstrip resources.
Rising Expenses and Poor Budgeting
Owners’ costs tend to rise faster than they expect. Rent, utilities, supplies, and subscriptions to software quickly accumulate. Without vigilance, costs consume margins. Misallocation of funds is also a factor. Most owners focus on sales and don’t have an idea where each dollar goes. There’s no room for surprises here, with unclear budgets.
Lack of Financing Options
Numerous small businesses rely solely on revenue to finance their operations. When cash is tight, they rely on loans or lines of credit. Good terms are harder to come by without advance preparation. A fractional CFO can assist companies in getting funding-ready, developing lender confidence, and obtaining funds before emergencies strike.
“At Starpoint CFO we offer fractional CFO consulting solutions that provide you with an expert, on-demand management without the cost of a full-time employee so you can manage cash flow and concentrate efforts where it matters”
I look forward to seeing how these developments will improve service levels and customer satisfaction in the freight industry!