Blog

About

Careers

Contact

Solo's blog provides the resources that microbusinesses, solopreneurs, freelancers, and other super-small businesses need to start, operate, and grow.

Blog for starting, running, and growing your business | Solo.co

Blog - All Posts

In this article:\nWhat is cash flow and why is it often an issue for small businesses?\n6 common cash flow issues and how to solve them:\nMany businesses don’t make it past the first couple of years due to cash flow problems. Whether they are spending more than they are bringing in or simply can’t keep up with payments, it becomes a real problem for business owners everywhere. \nIf your business is having cash flow problems, it may be wise to hire a financial consultant or CPA to help you analyze the situation. We’ll also give you some recommendations for solving common cash flow problems that businesses face. \nWhat is cash flow?\nCash flow is the term that refers to how the money moves in and out of your business. (And the term “cash” here doesn’t necessarily refer to hard currency or paper bills… it just means “funds.”) It isn’t just about profits, but all aspects of the funds that come in and how that money gets spent. \nIf you are coming up short on payments for necessary business obligations, can’t afford to grow with customer demands, or find that you’re spending more money than you’re bringing in, you have a cash flow problem. \n6 common cash flow problems small business face and how to solve them\nIt’s good to address cash flow problems as soon as possible so you can take adequate steps to solve them and keep your business running smoothly. Take a look at these common problems and determine if your business needs to work on them. \nOverestimating future profits\nUnpaid invoices from clients/customers\nUnorganized books\nSpending too much\nScaling too quickly\nNot maintaining cash reserves\nLet’s go over each and discuss ways to address them.\n1. Overestimating future profits\nMany business owners are overly optimistic about their business and how much they are going to make, especially when starting out. While optimism is a healthy trait to have, too much of it can hurt your business. \nOverestimating future profits can hurt your cash flow in numerous ways. You may make justifications for spending too soon or purchasing too much inventory because you are anticipating a good sales month. It’s important to maintain realistic expectations, and even underestimate so you don’t find yourself in trouble later on. \nHow to solve it:\nKeep yourself from overestimating future profits by using a solid method for sales forecasting. Use your history of sales to set expectations for each month, or if your business is relatively new, use real data from other businesses in your industry, and be realistic about how much of that share your new business is likely to get.\nNot sure how to do this on your own? Talk to a financial professional to get assistance in creating an accurate sales forecast. You should have a somewhat clear idea about sales forecasting if you did \nproper research before starting your own business\n.\n2. Unpaid invoices from clients/customers\nPerhaps the largest cash flow issue for most businesses is clients that haven’t paid their invoices. Lack of payment means less money for your business. \nThis can happen for a number of reasons: your client is having similar cash flow problems, they spent too much and suddenly can’t afford the service, they forget about the invoice, or maybe they simply don’t want to pay. \nIt’s important to keep track of and address unpaid invoices right away so they don’t become a large problem for you later on. \nHow to solve it:\nThere are a few ways you can resolve your unpaid invoice problems with customers:\nRequire a deposit up front\nSend out regular reminders when invoices go out (email and text reminders with a link to a payment option are great)\nHire a debt collector to assist with problematic clients (unfortunately many people don’t pay on time unless they are threatened with “collections”)\nConsider using an invoice factoring company\n3. Unorganized books\nStaying organized is a huge factor in keeping good cash flow and knowing where your money is. Unorganized bookkeeping can and will hurt your company if it continues for too long. \nUnorganized books can result in late fees for invoices you owe, missing client payments that you haven’t received, unexpected costs, and more. It’s important to keep your finances organized from the start so these issues don’t build up and become a real problem.\nHow to solve it:\nIf you are not an organized person or you are too busy to keep organized records of your finances, consider hiring a bookkeeper to help you out. A bookkeeper can help you keep good records of your incoming and outgoing cash flow so issues can be addressed early and nipped in the bud. \n4. Spending too much\nSpending more money than you have coming the simplest definition of a cash flow problem. If you don’t have the money coming into your business, you shouldn’t be spending it. \nOf course, in most cases you do have to “spend money to make money,” so you need to find that balance and anticipate costs that are necessary so you can make good decisions about when it’s okay to spend money even if you don’t necessarily have incoming cash flow yet. \nHigh overhead expenses can become a huge problem here if you don’t have enough incoming cash flow because these are generally expenses that you have no matter what, like rent, utilities, phone and internet bills, and more. \nHow to solve it:\nThe best way to address this issue is to cut costs where possible and limit your spending. Here are a few ways you can do that:\nAudit your expenses to determine what you can cut. This may bring light to unnecessary payments or subscriptions that you have\nGet quotes from different companies for your phone and internet. Find more competitive rates\nAutomate tasks that you generally hire people to do \nGo paperless with your invoicing and record keeping\nGet lean on office supplies, luxuries in your business space, “expensed” meals, and wherever else makes sense \n5. Scaling too quickly\nTrying to grow your business at a too-rapid pace can hurt you in the long run. If you don’t have the incoming cash flow to support your growth, your business is likely to fail if you’re not smart about scaling. \nThink about this example: you land a huge client that will bring in a large payment and ongoing future business, but you need extra help to finish their project, which will still take six months. You hire three people to help with the project, but after the first month you don’t have enough money to keep up with their paychecks. Now you’re in trouble.\nHow to solve it:\nBe smart about scaling. Only take on projects and clients that you have the current cash flow to produce results. \nIf you are faced with an opportunity to scale more quickly, consider taking out a \nbusiness loan\n to help you address the cash flow issues that may arise. \n6. Not maintaining cash reserves\nEvery business should have an adequate amount of savings in store to address unexpected cash flow issues. Disasters occur, clients leave, and unprecedented events (like, say, a global pandemic) take place that we never could have predicted. \nIn these circumstances, the amount of cash reserves you have can make or break your business. Even with adequate sales forecasting, we can’t always predict the future. So, it’s important to make sure you have something to fall back on when unexpected events take place. \nHow to solve it:\nIt always a good idea to keep at least two months of operating expenses saved up so that even if you do have a slow sales month or disaster strikes, you are able to make payments to keep the lights on and pay your employees. \nIf the problem persists beyond your reserves, you may consider pulling out a \nbusiness loan\n and looking at ways to gain more business. 

6 common small business cash flow problems and how to solve them

In this article:\nBest free receipt tracking apps, with features, pros, and cons\nAny business owner’s receipt pile can quickly grow out-of-hand and become overwhelming to manage. And it’s important to make sure you have a good handle on receipts for business expenses and keep them well organized to ensure a smooth tax season (whether you’re the one taking care of your own taxes or not). \nThis article will cover some fantastic free options to help you organize and keep track of your receipts along with the pros and cons of each app.\n7 best free apps to track your business receipts (review of features, pros, and cons)\nEach of the following apps are free, however, some of them have additional add-ons that you can purchase or even desktop/in-browser solutions that you can subscribe to. \nExpensify\n(Image)\n\nExpensify allows you to scan in receipts by snapping a quick photo, making it easy to keep track of personal and business expenses. Sort and categorize your receipts or even send have the app email them to the right person who handles your expenses. \nExpensify also has a card that you can sign up for that can be connected to your business bank account. Using this card will automatically place your business transactions into app for easy management. (The card is part of the Expensify subscription plan which is $4.99/month per user and does not come free with the app.)\nFeatures of the app include:\nUnlimited receipt scanning\nExpense management\nTravel booking through Concierge\nApproval workflows\nMileage tracking\nReceipt integrations (Uber, Lyft, and others)\nAccounting integrations (QuickBooks, Xero, NetSuite, and more)\nCustom reports\nPros of the Expensify app\nEasy to learn and use\nSet regular reminders\nSaves time and money\nCons of the Expensify app\nConcierge pops up to give tips now and then, this could be annoying to some users (but it could also be super helpful)\nEmails from Expensify are sometimes duplicated\nAutomated receipt processing doesn’t always work, so make sure you check the categories when uploading your receipts\nWave\n(Image)\n\nPreviously Wave had an app called Receipts by Wave, but it has been incorporated into this Wave Invoicing app that provides an all-in-one solution for your business, from sending mobile invoices to managing expenses. \nYou can easily connect your bank accounts to the app to manage your transactions, and it has a Guest Collaborator feature that allows you to share access with an accountant, staff member, or business partner. \nPlus, if you need to send customer invoices, this is a free solution that you can start with. \nOther features of Wave Invoicing include:\nUnlimited receipt scanning\nAccounting reports\nInvoice data backed up and securely stored in the cloud\nPros of Wave Invoicing app\nFree\nEasy to use and understand\nProfessional-looking invoices\nAllows creation of new categories\nCons of Wave Invoicing app\nLimited capabilities with reporting\nPredictive categorizations aren’t always right\nFreshBooks\n(Image)\n\nFull disclosure: This app is only free for the first 30 days and no credit card is required to start using it. After that time, you will need to subscribe to keep using it. But that gives you a good amount of time to decide if you like it. FreshBooks has pricing options starting at $4.50/month.\nFreshBooks is another all-in-one accounting software for small businesses. The FreshBooks app allows business owners to take their invoicing, expense tracking, and even time tracking on the go.  \nFeatures include:\nTrack expenses by taking photos of receipts\nProfessional invoices\nAccept online payments\nClient conversations \nTime tracking\nPros of FreshBooks app\nEasy to learn and use\nReliable invoicing\nGreat customer service\nCons of FreshBooks app\nFreshBooks has multiple apps out there, the classic version and this newer one, and they each have some different capabilities. This newer app doesn’t have some features of the classic app\nDivvy\n(Image)\n\nDivvy touts itself as the world’s first free, fully-automated spending and expense management software. It allows you to track business expenses with real-time budget insights to help you avoid going over budget. \nYour entire team can have access to the app to be able to make quick requests and approvals for budgets, and it allows the accounting team to see and record expenses in real-time. \nFeatures include:\nAutomatically record and submit expenses\nItemize spending data\nGlobal currency compatibility\nOnline card generator\nIntegrations with accounting software (QuickBooks, Xero, NetSuite, and more)\nPros of Divvy app\nIncorporate budgets for individuals and departments\nGreat customer support\nEasy to use and understand\nCons of Divvy app\nLimited capabilities with accounting software integrations\nShoeboxed\n(Image)\n\nIf you need something simple to just keep track of receipts and mileage, this could be just what you’re looking for. Take a picture of your receipt and let the app automatically pull all of your data like vendor, transaction amount, payment method, and date for you. \nFeatures include:\nUnlimited receipt scanning\nCategorize receipts\nCreate and send expense reports\nSoftware integrations (QuickBooks, Wave Accounting, Excel, Xero, and more)\nPros of Shoeboxed app\nEasy to use\nInvite multiple users\nSaves time and money\nCons of Shoeboxed app\nCan take a little time to load new receipts\nLimited functionality\nSmart Receipts\n(Image)\n\nSmart Receipts is another simple expense and mileage tracker. It also has fully customizable reporting capabilities so that you can easily keep track of your finances and/or send reports to accounting and business partners. \nFeatures include:\nUnlimited receipt scanning – take photos, import existing photos, import PDF receipts\nCategorize receipts – credit, edit and delete categories\nAutomatic exchange rate processing\nGenerate custom PDF, CSV, and ZIP reports\nAutomatic backups with Google Drive\nPros of Smart Receipts app\nEasy to use and understand\nSave time and money\nGreat for capturing receipts while traveling\nCons of Smart Receipts app\nLimited sorting/filtering capabilities\nAutofill data from receipts isn’t free (but this can be purchased)\nClear Scan\n(Image)\n\nThis app is for the people that still enjoy the DIY aspect of managing their receipts. It is simply a document scanning app. So you can take a photo to scan a document (or receipt) and then upload it to your file managing system–Google Drive, OneDrive, Dropbox, etc. \nIf you send everything over to an accountant, this could also be a good solution for you. Just take a photo from the app and send it over. Then you have it stored in one place, rather than having to look through the photos on your phone if you need to resend it. \nFeatures include:\nCreate folders and subfolders for categorizing\nExtracts text from images\nBackup and restore data\nConvert images to PDFs\nPros of Clear Scan app\nQuick and easy to use\nGreat scanning capabilities for a phone\nCons of Clear Scan app\nContains ads in the free version\nScans aren’t always perfectly clear\nThere you have it! Good luck, and have fun tracking your receipts.\nSources:\n
\nhttps://www.trustradius.com/products/expensify/reviews\n
\nhttps://www.trustradius.com/products/wave-accounting/reviews\n
\nhttps://www.trustradius.com/products/freshbooks/reviews\n
\nhttps://www.trustradius.com/products/divvy/reviews\n
\nhttps://reviews.financesonline.com/p/shoeboxed/\n
\nhttps://play.google.com/store/apps/details?id=wb.receipts&showAllReviews=true\n
\nhttps://play.google.com/store/apps/details?id=com.indymobileapp.document.scanner\n

8 articles found in “Accounting”

6 common small business cash flow problems and how to solve them

7 best free receipt tracking apps (review, features, pros, and cons)

Recommended

How to spot fake online reviews

25 free business listing websites every small or local business should be on (Updated for 2022!)

How much does it cost to rent space for a small business?

The 6 elements of an effective customer loyalty program

Important market research questions to ask before starting a new business