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Small businesses face big time cash flow problems. Outgoing invoices or bills don't get paid on time. And incoming bills for rent, electric, supplies and more demand payment.
You are your own backup of last resort. A certain amount of prudent juggling can see you through--usually. But sometimes that is just not enough.
Example: A small manufacturing business solved the ups and downs of cash flow by putting in place a revolving line of credit with a local bank. It was for a significant amount of money. When incoming cash did not meet the outgoing cash requirements, the owner hit the revolving line of credit for a cash infusion. It was a short term loan. When the receivables came in, the loan was paid off. Problem solved.
Example: An even smaller business handled the ups and downs of cash flow in a different manner. Due to its small size, this business was not eligible for a revolving line of credit. The owner juggled outgoing payments for materials and supplies, balancing bills with cash to pay them. When a shortfall still existed, he held his own paycheck until the bank account could handle it. He always wrote his paycheck, but he threw it into the desk drawer awaiting the day when it would clear the bank account. Sometimes, this took weeks.
Example: A pet store owner sometimes did not have enough cash on hand or in the bank account to pay for supplies and goods for resale. She used credit cards to pay the bills on time, taking advantage of any discounts offered for on-time payment, and then she set aside funds every week to cover the credit card charges that would be coming on the next billing cycle. By paying off the credit card on time when the statement came, she gave herself a free loan. This, of course, does not work if you simply let credit card charges pile up--you'll owe big time interest charges.
The marketplace and the economy can throw all sorts of problems at you. In small business, one of the worst problems you'll face is the problem of cash flow. Be prepared when your cash flow stops flowing.
Your ingenuity is what got you into business, and your ingenuity will keep you going. You can build on what works, and you can discard what does not work.