5 signs you have cash flow issues

5 signs you have cash flow issuesColour, Wheel

Whether it’s for personal use or for your business, cash flow is important. The movement of money in and out keeps everything running smoothly and it’s essential to know where you stand at all times.

But what if your cash flow isn’t “flowing”? If it seems that you’ve tightened your belt in most areas but are still coming up short, you may have cash flow issues.

Here are some telltale signs that your cash flow is at a standstill.

1. You’re using your credit card every month

Lots of people use their credit card for most purchases these days, and that’s okay – as long as you’re also paying it off. There are definite advantages to using your card (accumulated points or rewards), but these perks are irrelevant if you’re spending money that you don’t actually have. If you can’t pay what you’re spending on your card with cash every month, it’s time to reevaluate how you’re using that card. Think of the real dollars you’re spending every time you tap at the till, and if you don’t have real money to pay off your purchase, reconsider it.

2. You can’t cover your bills

This is a major red flag and a sign that your budget doesn’t add up. All of your bills need to be accounted for each month, and that includes setting money aside for large future expenses like taxes. Bills should really be accounted for first, right next to money for food and shelter. If you find it’s a challenge to pay all of your bills, it’s likely that you don’t have enough cash coming in; or you’re spending it on things that shouldn’t be as high on the priority list.

3. You’re running out of money at the beginning of the month

If all of your payments come out and you find you’re already tapped at the start of the month, you’re likely not bringing in enough money. When we add up our living expenses and plan for all of our payments to come out, it’s important to have some wiggle room to carry you through to the next month. Unexpected expenses can pop up, and nothing is as stressful as finding out you don’t have enough money to cover them. Make sure you’re earning enough to carry you through the entire month, and not just the typically bill-heavy first week.

4. There are no other costs to cut

So you’ve gone through your subscriptions, pared down your grocery bill, cut back on your nights out and you’re still not bridging the gap. If you’re planning for your business, maybe you’re barely scraping by with no profits, or aren’t left with enough money to pay yourself. When every penny you make is going toward only the necessities, you definitely have cash flow issues. If you’ve cut back in every imaginable area and are still struggling, you need to find a way to bring in more money. It’s as simple as that.

5. You don’t have an emergency fund or cash chest for difficult times

This sign goes largely ignored by many people these days, with the cost of living being so high. It’s very difficult to save any money under these circumstances and the reality is that most people just don’t. But don’t ignore this telltale sign that your cash flow isn’t healthy. It’s crucial to have something saved for a rainy day, and putting some money in your savings each month must be done, just like any other bill. Otherwise, you’re likely to lean on credit when these surprise expenses inevitably occur.

Final thoughts

It’s easy to ignore cash flow issues when we have the safety net of credit and if we’re managing to scrape by. But managing your cash flow is a critical practice that alleviates stress and prepares you for the future. You can start by forecasting your cash flow; this will give you a clearer picture overall about your business and how the money moves in and out. It provides important insight into your company’s financial health.

If you haven’t conducted cash flow forecasting so far, it’s a good idea to get started now so you have a better understanding of your company’s finances and so you can prepare for the future. You can get started with a free cash flow forecast tool – available to download here.

Cash Flow Experts

Our team of friendly bookkeepers are passionate about supporting small businesses with all aspects of bookkeeping – including cash flow forecasting!

See below for our bookkeeper locations.

Justine Day | Southern Highlands Bookkeeper
Petra Austing | Southern Highlands Bookkeeper
Nicole McLaren | Southern Highlands Bookkeeper
Karin Evans | Gold Coast Bookkeeper
Pru Hall | Wollongong Bookkeeper
Jackie Short | Canberra Bookkeeper