How to Solve 5 Stressful Financial Challenges Facing Small Businesses

This post was contributed by Nell Gable, Content Marketing Manager at PaySimple, a commerce platform that helps small business automate service marketing, management, and payment collection.

Thousands of Americans dream of following a passion and starting their own small business — and each month, nearly 543,000 entrepreneurs make that dream a reality.

Yet, becoming a business owner doesn’t necessarily equip you with the skills necessary to sort out the financial side of things. Nearly 80% of businesses fail in their first 18 months of existence. The main reason behind this sad fact?

Most simply run out of money.

If you’re fretting over the financial management of your small business, you’re not alone. Here are the five most stressful financial challenges small businesses face:

Creating a Reliable Cash Flow Forecast

Creating a reliable cash flow forecast is one of the most challenging components of setting up a small business. Not only does it require an incredibly tight grasp of the inner and outer workings of your company’s finances, it requires you to be brutally honest with yourself. Fudging numbers and giving yourself the benefit of the doubt will do nothing but harm your business in this case.

The Solution:

Even the most conservative cash flow forecast can fall apart if payments come in late or you get hit with an unexpected expense.

That’s why it’s important to set yourself up for success by optimizing the systems you can control. Your clients will inevitably pay late at times, but what can you do to ensure it’s as easy as possible for them to hold up their end of the deal?

Here are a few safeguards to consider implementing:

• Set up recurring billing as a way of improving customer experience so you can retain more consistent business and get paid regularly.

• Partner with a payment solution that provides automatic payment reminders so you can stop chasing checks and focus your attention on more strategic thinking.

• Productize your service offerings so you don’t need to create a custom line item for every transaction.

For more advice on creating a reliable cashflow, check out this post.

Accepting Payments Online

Not surprisingly, as our reliance on technology has increased in recent years, our dependence on cash and paper checks as payment methods has decreased significantly. A study by the Federal Reserve showed that payment through checks has gone down sharply each year, with only 15% of payments made by check in 2012. And 10% of Americans don’t carry any cash at all.

What does that mean for small business owners? If you’re not accepting online payments, you are at risk to lose business to competitors who are.

The Solution:

Breathe easy — accepting online payments is easier than you might think.

Start by establishing a merchant account. When setting up a merchant account, businesses have two options. The first is to get a dedicated account provisioned solely for your business.

This can be done through payment commerce platforms like PaySimple and requires going through an application process to ensure your business is in good credit standing. Once you are set up with a dedicated account, you retain full control of keeping your account in good standing.

The other option for setting up a merchant account is to take part in an aggregated account (like PayPal) where a single merchant account provides payment processing for an entire portfolio of businesses. This option is less regulated and faster to set up, but because you share financial liability with other businesses, they can put your credit at risk, so be sure to partner with a reputable merchant.

For a detailed list of all the ways you can accept online payments, check out this article.

Getting Customers to Pay On Time

Whether you’ve been in business for years or you’re a newly minted entrepreneur, late payments are likely a major thorn in your side.

Getting customers to pay on time is one of the most time consuming challenges a small business faces. And as we mentioned before, late payments can have major consequences for your cash flow forecasting and could even hinder your ability to make payroll or pay debt.

The Solution:

The single most effective approach you can take for preventing late payments is to streamline your customers’ payment experience. By making it easy to pay bills, ideally on an automatically recurring basis, your customers will stay happier and so will you. Find a payment solution platform that makes it easy to automate billing, send out payment reminders and keep track of all customer billing information in one place.

Setting Up an Online Store

Creating an online store for your business can seem like a daunting task. You may need to start asking yourself questions such as:

Will I need to hire a developer?

What if I need to add products or services?

How do I market my online store?

Service-based businesses in particular are met with significant hurdles when setting up online stores.

Why? Because most website and shopping cart solutions aren’t built for them — they’re built for retail. This forces service providers to make their best attempt at adapting retail-focused solutions to their own needs.

The Solution:

Luckily, an increasing number of payment solution providers have begun to adapt their services to the needs of service based business in recent years. This allows businesses to productize their services, preventing the need to customize every single transaction. Needless to say, this is a major time saver.

Keeping Costs Down

When you’re running a small business, every penny counts towards boosting your bottom line. That’s why it’s so challenging — yet crucial — to sift out unnecessary costs and adjust accordingly. Yes, you need to pay for certain tools and resources to operate, but which are providing positive ROI and which are dragging you down?

The Solution:

Tedious as it may be, you should be conducting an extensive review of your expenses on a quarterly if not monthly basis. Go line item by line item and scrutinize each cost. If it’s providing your business positive ROI, then keep it. If it’s creating more cost than benefit, ditch it and look for a more cost effective option.

One major benefit of utilizing SaaS solutions (software as a service) is that they allow you to pay for only the services you need in the months that you need them, so that if your requirements change or you’re not seeing enough return, you can simply cancel and cut costs almost instantly.

For a list of ways small business can cut costs, check out this article.