How to Fix the 5 Most Common Cash Flow Problems in Your Online Business

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Picture this…

You’re living paycheck to paycheck and constantly wondering where your next client is going to come from. You’re not making a whole lot — just enough to scrape by.

But, it’s all good because you get to live your best jet-setter life — it’s just you and your laptop against the world. 

Talking about living the dream right?!

Wrong. Even with the freedoms and flexibility owning your own business has, living paycheck to paycheck is no way to grow it (or sustain it). 

You may not want to be raking in $10K every month, which is more than okay. But… I’m willing to bet that a financial cushion sounds pretty nice too, right?

To do that, you need to get past just keeping things afloat. 

But how do you make sure you have the cash flow needed to pay yourself and run your business? 

Well, get your pencils out — because in this post, I’m talking about five of the most common cash flow problems you could have in your online business (and how to fix them). Let’s dig in!

#1: Your clients aren’t paying you on time

Constantly chasing invoices? Then it may be time to update your contract and add in some late fees. It’s stressful to constantly see “unpaid” all across Dubsado. And it’s not fun having to bug your clients about getting paid, either. 

But… you did the work, and you deserve to get paid! So make sure your contract is up to date with terms of payment. 

Maybe offer payment plans if you find clients are constantly struggling to pay you on time. Maybe set up more (timely) reminders in your Dubsado automations. But always always include late fees!

(PRO TIP: Make sure you clearly outline all this in your contracts too. The clearer, the better.)

#2: You’re trying to pay off debt

If you have some pretty big debt you’re trying to pay down, namely on a credit card, it may be time to reevaluate your budget. Maybe take a hard look at how much you’re spending each month. You don’t want to get BACK into credit card debt (or more of it) after all!

And while I’m all for paying those cards off, if you can’t pay yourself, or pay your employees, or keep the lights on in your business, it’s time to change your payment plan. 

You want to get to the point where you can pay your credit card bill (above the minimum) while still having a cushion for your business. That’s the sweet spot!

#3: Your expenses are too high

That brings me to my next point… your expenses may be too high if you’re having some cash flow probs. 

The hardest part of this point is that it may require you to cut back on some expenses in your business. No fun! But trust me, you do not want that debt — or low cash flow — lingering around. 

It’s time to review your expenses, top to bottom, including payroll. 

Can you switch from monthly to annual subscriptions? (Note: this will be a bigger upfront cost, but it will save cash in the long run). 

Try paying debit instead of credit, so you’re not tempted to buy something and forget to pay it off (or allow the pile of debt to keep growing).

Maybe you’re just plain ol’ buying too many things you don’t need. You know…those fall-scented candles? All those books from Barnes & Noble you know you’ll never read? If that hits a little too close to home, try going on a spending freeze!

No more spending until everything in your business is optimized, systemized, and automated. You can think about the next steps and spending money when you get that taken care of. And yes — this will make a difference!

Reviewing expenses for contractors and employees

When business owners think about cutting back on expenses, their workforce is undoubtedly one of the first things that come to mind. And it makes sense because it’s such a huge expense — the biggest one next to taxes. 

But it’s not always a good idea to cut your team because of cash flow. If you’re in a slow season, you may want to wait on that. But if you’ve come to the conclusion that the role can no longer support you or your business, listen to me carefully…

Treat people fairly.

Your employees and contractors are people too — people with families, lives, and expenses that need to be taken care of. If you absolutely need to let anyone go, do it legally (this mainly applies to employees, but contractors too). 

And if you’re cutting back and shifting roles around, make sure you compensate your team accordingly for the added responsibilities (as in… a raise). 

#4: You’re paying too much in quarterly estimated taxes

Here’s the thing — paying too much in taxes, on purpose, could be hurting your cash flow. Some of you are so scared to death of the IRS that you knowingly overpay so you won’t go to jail. Newsflash: You can’t go to jail if you’re not doing anything illegal!

There’s no need to overpay when you could just take that money and hire a CPA to help you file the correct amount.

Why do I say CPA and not bookkeeper? Because CPAs take the whole picture into consideration when filing your taxes, not just your expenses. Things like life events, real estate, your partner’s taxes, etc. 

With a CPA, you get a better picture of what you truly owe. 

#5: You’re using a Profit and Loss Statement instead of a Cash Flow Summary

Listen…P&Ls are important. But if you want the total picture of your expenses, then you need to be looking at a cash flow summary instead. 

This is because P&Ls don’t include everything, just your business expenses. A cash flow summary, however, will also show you things like 

• Your credit card payments
• Your owner’s draws
• Payments made to the IRS

But why don’t these show up on your P&Ls in the first place? It’s because of GAAP (generally accepted accounting principles). GAAP requires us to categorize these as a reduction in equity, not expenses. 

So that’s where a cash flow statement comes in handy. You can see exactly what’s left over when all is said and done. It’s a literal *chef’s kiss.*

Want more tips like these?

Making simple changes like these can give you more cash flow in your online business. I mean, just imagine that a year from now, after you’ve implemented these changes, you’re able to finally have some cushion money. 

That you can actually afford your lifestyle, pay to hire a team, maybe even take some time off, and most definitely, grow your business! It sounds pretty nice, doesn’t it?

So go put a date on your calendar to implement these changes. Make a commitment to it. You won’t regret it! 

And if you want more help with all things business finances, be sure to check out more of my YouTube channel! It’s chock-full of everything from tips on filing your taxes to industry-specific bookkeeping tips and more!