Home Budgeting How Entrepreneurs Can Protect Their Cash Flow

[Stacey Tisdale’s Financial Life Lines] How Entrepreneurs Can Protect Their Cash Flow

A new Fintech tool that turns credit cards into checks

Cash flow is everything to a business. It’s the river that feeds the ocean, the bees moving from flower to flower with pollen, and the bus taking your children to school. It gets things moving.

Sir Richard Branson, media magnate responsible for Virgin Group, puts it well:

“Never take your eyes off the cash flow because it’s the lifeblood of business.”

For Ashwin Sokke, owner of health and beauty e-commerce brand Fit & Glow, cash flow meant everything for his business.

“Most traditional banks don’t seem to understand fast growing e-commerce businesses,” adding that traditional banking systems do not to alleviate the cash flow burdens that come with entrepreneurship.

According to a widely-publicized U.S. Bank study, about 82 percent of businesses fail because of cash flow problems. Many of the businesses that fail due to cash flow might be experiencing one of the following issues:

  • You’re profitable, but cash is not coming in quickly enough
  • You’re not profitable, and need to make investments to grow your business
  • Taking out a loan is not possible, probably due to one of the above factors

    Ashwin Sokke, Owner, Fit & Glow

That means pretty much every business owner should be strategizing how to maintain and maximize their cash flows to keep from being a statistic.

Innovation Meets Cash Flow

Eliot Buchanan is the CEO of  Plastiq – a company that helps entrepreneurs use credit cards for financial transactions that typically require a check.

“Credit cards are the most accessible financing tool for many businesses, providing a revolving line of credit they can immediately use to fund or expand business operations,” says Buchanan.

“With Plastiq, business owners can pay a large majority of their expenses by credit card, which allows them to better manage cash flow, tap early pay discounts and earn card rewards.”

For Sokke, Plastiq’s process of charging business lines of credit and paying invoices on Fit & Glow’s behalf allowed him to continue to grow business.

“Efficient cash flow for a business like ours means that we can go for higher scale in cycles of inventory, media buying, and logistic costs,” Sokke said.

Handle With Care

Most credit cards come with a grace period, during which you can repay your charges without accruing

Eliot Buchanan, CEO Plastiq, Photo      Courtesy of Plastiq

interest. That means with Plastiq’s 2.5 percent fee, you can turn credit into cash without using a cash advance.

Bruce McClary of the National Foundation for Credit Counseling, (NFCC), points out that even with the benefits of a product like Plastiq, business owners must be careful not to take on more debt than they can manage within a reasonable time.

“Business owners know that timing is critical for planning when and how much to borrow. If cashflow is an issue, borrowing is only a temporary solution that may lead to more troubles if the root cause of the cash flow problem is not resolved and if there is no plan for repaying the debt,” says McClary.

“There are numerous resources offering guidance in these situations, and reaching out to a trusted provider of small business owner financial counseling is a good first step,” he adds.

Cash Flow Solutions

Cash flow is one of those complex relationships we have with money that will statistically sink most small business ventures. Plastiq and others in the Fintech space are offering financial life lines to entrepreneurs in exactly the space where they need it the most.

Mind Money Media may receive compensation for the products we write about. Articles like this allow us to deliver the highest-quality content and financial advice, and affiliate links have been included for that purpose.

Stacey Tisdale
Stacey Tisdale
Founder, CEO, Executive Producer

Stacey Tisdale, a more than 20-year veteran TV broadcast financial journalist, and financial behavior expert, is one of the first women, and the first African-American to report from the New York Stock Exchange, in her role as a reporter/anchor for Dow Jones' Emmy Award-winning, Wall Street Journal Television.

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