10 Small Business Financial Challenges––Solved

From a lack of access to capital and underestimating cash needs to burning through existing cash reserves, financial knowledge and strategic planning are essential for long-term success.

Have you ever thought that your company’s financial challenges were uniquely your own? If so, don’t fret — you are not alone.

In fact, it is not uncommon for small businesses to experience a variety of financial challenges as they navigate entrepreneurial growing pains which are often likened to a firm moving from childhood to adolescence and then adulthood.


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From a lack of access to capital and underestimating cash needs to burning through existing cash reserves, financial knowledge and strategic planning are essential for long-term success. Most importantly, gaining straightforward answers can give you the courage to overcome common financial problems in business.

With this in mind, let’s empower your financial success in years to come with viable solutions to ten common financial challenges you may experience in business.


1. We don’t have enough cash to maintain daily operations.

As entrepreneurs we know first-hand, that it takes money to make money! Typical expenses range from marketing and merchant fees to payroll, rent and production costs. Ultimately, your cash position is a sign of financial strength and liquidity.

So, if you have been strapped for cash lately, look for new ways to maximize reserves. Start with streamlining payment collection processes to settle payments faster and then review payment disbursement schedules to optimize terms with vendors.


2. Our sales are good, but our profits are really low.

Generally, this indicates over-spending or hidden costs eating away at your bottom line — your expenses could be out of control. Reign in expenditures by proactively creating a purchasing policy and system to ensure that you are buying the right materials at competitive prices from vendors that add value.

Gain visibility into your expenses and clearly define purchasing (i.e. procurement) goals with a strict budget. Then ensure there is supervision of policies, ordering, receiving and reporting. Don’t hesitate to revisit vendor selection and old contracts to start price negotiations. Lastly, if you frequently make online purchases, use free apps like Slice to track spend, hunt bargains and streamline online purchasing.


3. We experience cash shortages on a regular basis; we weren’t ready for the seasonal sales slump that just hit.

According to venture capitalist Fred Destin, you should always keep your eye on cash – dynamically. Destin suggests, that “in startups the only real sin is running out of cash, and the cardinal sin is running out of cash unexpectedly. So whilst you may not need a CFO, you sure need someone who understands cash flow and can give you the confidence to know when it’s running out.”

One sure fire way to prevent unexpected cash shortages is to hire a CPA to regularly prepare key financial statements (e.g. balance sheet, income statement, cash flow statement) to forecast cash needs. Most importantly, gain a working knowledge of your finances. If you prefer a DIY approach to financial education, take online courses via Coursera and Udemy.


4. Managing company’s finances is a nightmare. Should we hire someone?

Many small businesses hire outside help to manage “numbers nightmares.” Like most startups you likely started managing your finances in QuickBooks or Excel. Often the next step is to do the books yourself or hire a bookkeeper to regularly maintain your records.

But did you know you can cost-effectively hire a temp CFO to look over your numbers and make sure you’re doing things correctly? In fact, outsourcing a CFO can improve your company’s financial discipline, planning and analysis while providing a more strategic vision to shape long-term financial goals. Interim CFO services and part-time CFO companies (e.g. The CFO Connection, B2B CFO etc.) can be cost-effective and well worth the investment.


5. A large majority of our clients pay late on a regular basis.

The check is (not really) in the mail. In fact, you may not be at the top of your customer’s payment list. Did you know that 80% of small businesses are still plagued by late payments? If you are one of them, it’s time to tighten up credit terms or create policies and processes to manage the situation.

For example, pull business credit for new customers, communicate payment policies early and often, incentivize early payments, make it convenient for customers to pay and enforce late payment penalties. Most importantly, do it all with a smile. Please and thank you can go a long way when it comes to getting paid on-time.

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6. We need to raise capital, but we’re not sure which funding option to choose?

First, become crystal clear on why you need cash in the first place. A variety of funding options are available to small businesses: bootstrapping, friends and family, crowdfunding, business loans, grants, venture capital, angel money, etc.

Not every option is viable for your business. This is why you should have clarity on your current financial picture and assess risk tolerance for each funding vehicle. Carefully research and consider the upside and downside of each option and choose wisely.


7. Business is slow; we have lowered prices and launched numerous sales promotions, coupons and markdowns just to stay afloat.

If sales are slow, offering excessive discounts is not the answer. Consumer-oriented sales promotions can drive short-term sales to offset competitive pressure, yet threaten the long-term survival of your brand. Price wars come with high casualties – most notably, reduced profit margins.

Instead, revisit your business and revenue model (i.e. how you monetize your business). Seek to provide more value to current customers by upselling and cross-selling. Fear-based tactics are rarely profitable or sustainable long-term.


8. Cash flow management is complicated; how can I manage cash better?

Simply put, cash flow is “money in, money out.” How you manage this dynamic of your business over time impacts every area of your operations. Consider this: monitoring cash flow can forewarn you of a need for cash and reveal cycles in your business; better preparing you for the financial road ahead.

Staying on top of your cash flow position can be tedious. Thankfully there are free templates, cash flow calculators and paid apps like FreeAgent, Enloop and Pulse to monitor the lifeblood of your business.


9. We pay creditors and expenses late on a regular basis. How can we gain control of payables?

Do you have a budget? If not, it’s time to create one. Every small business should create an operating budget to prepare for regular expenses such as utilities, rent and wages. Your operating budget is comprised of several sub-budgets and acts as a projection of income and expenses for a certain period of time. First, prepare your sales budget by referring to historical sales reports, if applicable. Then, estimate your costs and set aside cash each month to pay them. Budgeting will help you gauge targets and prepare to meet your commitments on a regular basis.


10. How can I improve my overall knowledge of our company’s finances?

In retrospect, when I first started a business I immediately sought out great business books. One book in particular helped me to understand my financial picture as a female entrepreneur: Minding Her Own Business: The Self-Employed Woman’s Essential Guide to Taxes and Financial Records.

Other small business finance books that may prove useful include: Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean, Financing Your Small Business, and The McGraw-Hill 36-Hour Course: Finance for Non-Financial Managers.


Disclosure: This post is brought to you by Visa Small Business and I receive compensation for my time from Visa for sharing my views in this post, however the views expressed here are solely mine, not Visa’s. This post discusses general financial issues, but it does not constitute financial advice in any respect. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of a financial professional. YFS Magazine expressly disclaims all liability in respect of any actions taken or not taken based on any contents within this post.


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