Low on Cash? This is Normal at Every Stage of Business

It might be tempting to think that only startups experience cash problems. After all, they’re just starting out, and it’s expected that they’re still figuring out how to generate enough sales to cover all their expenses. But what about as your company moves beyond the startup phase? You might wonder if it’s normal or not for it to continue encountering cash issues.

Well, we’re here to tell you to rest easy. While nobody wants to feel strapped, it’s actually quite normal for cash problems to occur in all stages of business. In this post, we’ll explore the reasons why it happens so you can prepare yourself and your company for these situations.

The Startup Phase

As briefly mentioned above, it’s common knowledge that many startups run into cash issues. In most cases, they’re spending a lot of money on getting the business set up and haven’t begun generating enough sales yet. This can obviously lead to a cash crunch since most of the company’s money is being poured into it to get everything off the ground. It’s important to remember that this is likely temporary and will be alleviated once you begin making sales more frequently and regularly.

The Early-Stage Operating Phase 

At this point, most companies are generating more sales; however, they still might not always have enough cash on hand because they need to pay certain operating and overhead expenses. If your business isn’t making enough in sales to cover these costs, this will naturally cause some anxiety even though this is a common scenario (you’re not alone!) The goal should be to keep increasing the volume of your sales so all of these recurring expenses are consistently paid in full with money left over. Whenever possible, you’ll want to avoid operating at a deficit by overspending on non-essentials things.

The Growing Business

Even when a company is fully operational and growing quickly, it may still have to deal with cash problems at times. Most commonly, when the business is ready to expand – whether by hiring more staff, opening a new location, increasing inventory, adding new products or services to its line, buying new equipment, or investing in marketing – it will likely need an infusion of cash. Most of the time, the amount needed won’t be lying around in the bank account. The best way to manage this situation is to identify a way to fund the need (for example, by borrowing or investing more money from another source). 

The Profitable Business

You might assume that a profitable company never encounters cash problems. Well, if so, you assume incorrectly! Because with all that profit also generally comes a large tax bill – sometimes business owners expect this, and sometimes they don’t. Either way, it can be a real struggle sometimes for even the most profitable business to scrounge up all the cash it needs to pay the tax man. 

A Final Word from Tuesday P. Brooks Owner of AJOY

So, if you ever feel like your company is the only one strapped for cash at times, please know that it’s most definitely not! All businesses experience cash issues – it doesn’t matter what stage they’re in. This is just part of running a company. But as long as you work with a trusted financial professional and have an awareness and understanding of this topic, you’ll be well-prepared for any cash issues that arise and know exactly how to navigate them successfully. Never feel discouraged because this is just a natural, normal aspect of operating a business!