To build and maintain healthy cash reserves, startups should implement a systematic approach to cash flow management. This includes establishing a regular savings schedule, setting aside a percentage of revenue during strong months, and creating clear guidelines for when reserves can be used. Additionally, developing multiple revenue streams and maintaining strong relationships with potential investors or lenders can provide additional safety nets during challenging periods. The consequences of insufficient cash reserves extend beyond just survival concerns — they can severely limit a startup’s ability to capitalize on growth opportunities.

Assess short-term cash needs regularly to ensure you have enough cash on hand. Plan for unexpected expenses by setting aside a portion of your cash reserves. Regularly review and adjust reserves to ensure they remain adequate as your business grows and changes. Implement cash management software to automate and streamline cash flow processes. Automate cash flow processes such as invoicing, payment collection, and expense tracking. Utilize online payment platforms to speed up collections and reduce processing times.

• Cash reserves can keep your company afloat during lean periods or if you experience an unexpected drop in sales.
• The amount of product you keep in stock depends on your volume, sales forecasts, available cash, and supplier capabilities.
• Examples of this include poor financial management, too much debt, incomplete accounting, or growing too quickly without enough working capital.
• Others are discretionary or opportunistic, such as buying or selling a subsidiary, a joint venture, or an investment.
• Our dedicated experts research and test SMB solutions so you can make smart, confident decisions.

Proven Strategies to Solve Cash Flow Problems

In some cases, a lack of liquid cash can lead businesses to expensive financing options that leave them in debt, increasing expenses in the form of debt service. Whether you’re a monthly, quarterly or annual tax filer, it’s your responsibility to file the correct amount of business taxes on time. We have financial relationships with some companies we cover, earning commissions when readers purchase from our partners or share information about their needs. Our editorial team independently evaluates and recommends products and services based on their research and expertise.

How cash flow problems start and how to fix them

Before you agree to that big project or bring on that new client, review how that will impact your cash flow. As said before, growth isn’t good if you can’t handle the extra costs of new business, whether that’s labor, supplies, inventory or other costs. For businesses that don’t get paid in full when a sale is made, it’s essential to collect payments as quickly as possible. The older accounts become, the more likely you’ll have trouble collecting. Improve cash flow with invoice financing through QuickBooks Line of Credit. Selling products and services for too little can result in low profit margins.

Solutions for managing decreasing sales or profit margins

This will erode your cash flow and result in reduced profitability. Here is a compilation of top three accounting problems on cash flow statement with its relevant solutions. Most businesses are still dependent on Excel for cash flow analysis, with limited scalability.

• Assess short-term cash needs regularly to ensure you have enough cash on hand.
• Depending on your circumstances, a few creative changes may help get you back to positive cash flow.
• By streamlining cash-related activities and utilizing advanced features, businesses are able to accelerate cash inflows, enhance cash management productivity, and optimize cash utilization.
• For instance, quickly expanding into a new region or market will likely demand significant, up-front investments.
• Our platform eliminates the complexity of managing multiple financial tools while giving you deeper insights into your business’s financial health.

Although short-term loans can seem like a lifeline when you’re experiencing problems with cash flow, there are caveats. First, you may need to have a documented business plan and cash flow forecast to show lenders. Cash flow projections and accurate sales forecasting can help small business owners plan for seasonal changes. Business owners should consider using an inventory management system to balance their inventory. Keeping inventory on hand for the shortest time possible can keep inventory from contributing to cash flow shortages.

Studies show that poor cash flow management is one of the leading causes of business failure. But don’t worry – these issues can be tackled with the right strategies. Read our blog post on cash flow management to understand importance to your business and how it can be the key to long-term growth. Optimizing cash flow timing means managing the timing of cash inflows and outflows to minimize cash flow gaps and maximize cash flow availability. This can help the business to improve its liquidity and solvency, and reduce its reliance on external financing.

This will help determine whether you’re on par with companies in similar industries and lifecycle stages, or if you’re out of balance somewhere. Then you can begin diving into your actual expenditures, determining where your spending might be higher than necessary, and where you can make strategic cuts. A good place to start is to categorize your spending into general & admin, research & development, sales & marketing, operations, and COGS. If not, then the category in which you seem to be overspending is a good place to start looking for adjustments that can be made. Even with great forecasting, your business may encounter unexpected expenses.

With payment automation and automated invoice processing and collection tools make it easier to manage an expanding client base efficiently. Additionally, Brex’s networking and partnership opportunities can help startups connect with potential new clients, accelerating their diversification efforts. To effectively manage seasonal fluctuations, startups should develop comprehensive seasonal planning strategies. Some successful startups even develop complementary offerings specifically designed to offset their seasonal downturns. Brex’s financial intelligence platform helps startups transform their revenue forecasting from guesswork into a science.

Knowing your numbers, managing your cash flow and planning ahead are all key to building a financially healthy business. Here are additional steps you can take to help protect against common cash flow cash flow problems problems. So the very first thing you should do is to set up a budget and make sure you are tracking your finances either with accounting software or with the help of a bookkeeper or accounting professional.

Not having a good read on how much money you have and how much money you will have in the near future and distant future is the reason why many businesses lose control and close their doors. Get 95% forecasting accuracy with AI and 30% savings on bank fees with HighRadius Treasury and Risk software. Explore how B2b payment automation streamlines workflows, enhances security, and turns AP teams into strategic powerhouses. While these aren’t inherently bad decisions, poor timing or lack of planning can turn them into painful lessons. Further, by supplementing these tools with early-payment discounts and easy-pay options, you can remove additional barriers from the payment cycle. It’ll help to have data; collect information about the business as well as from wider market research.

Building in contingencies for different scenarios and maintaining open communication with customers about their future purchasing plans can also help create more reliable projections. The harsh reality is that cash flow problems remain one of the leading causes of startup failure. In fact, CB Insights says nearly 2 in 5 startups (38%) fail because they run out of cash. When companies can’t effectively manage the balance between money coming in and going out, even strong business models and growing revenue can’t ensure survival. This challenge becomes particularly acute for early-stage companies that typically operate with limited reserves while facing significant upfront costs and irregular revenue patterns.

For many of these businesses, viewing their cash balances across multiple entities and geographies is difficult, especially in a decentralized environment. By implementing these strategies and leveraging the power of financial tools like Cloudfloat, Australian businesses can achieve sustainable growth and long-term success. Some quick strategies include offering early payment discounts, automating payment reminders, negotiating better supplier terms, and using Cloudfloat to bridge cash flow gaps. They start as patterns—slight delays, recurring shortfalls, or decisions made without complete data. But the businesses that spot the signs early and install smart systems are the ones that stay strong.

According to a 2025 QuickBooks survey, 43 % of small businesses consider cash flow a problem—and 74 % say it has worsened or stayed the same over the last year. Examples of this include poor financial management, too much debt, incomplete accounting, or growing too quickly without enough working capital. Cash flow problems occur when a business doesn’t have enough cash on hand to cover its expenses.