Walking on thin ice is a spot-on analogy for any business owner who has experienced cash-flow problems in a business. Being oblivious to your cash-flow issues may be just as dangerous.

To avoid ending up all wet, you may want to attempt the following.

1. Reduce your debt.

Let's say you're paying a lot for a warehouse or for high-interest loans on your company vans. You may want to consider refinancing, transferring the debt to a lower-interest loan—or, yes, paying the debt off—to eradicate cash-flow problems in a business.

“When business owners see a beautiful bottom line, they often forget that their positive net income has not accounted for the principal portion of your loan payment for equipment or mortgage payment for the warehouse," says Emily Fisher, the owner of Fisher, P.A., a certified public accounting firm in Charlotte, North Carolina.

“Well-planned cash-flow budgets will begin to bring transparency to the monthly capital needs of the company," Fisher says, "allowing the business owner to know how much cash to keep on hand for operations and to meet forecasted growth plans."

2. Increase your debt.

Increasing your debt can help avoid cash-flow problems in a business? Didn't you just give the opposite advice a moment ago?

Well… yes and yes. As Fisher observes, some entrepreneurs have the opposite problem of the business owner who is saddled with too much debt.

“We've worked with business owners who were determined to purchase all their large equipment with cash, but struggled to take on larger projects because they lacked the capital to fund the project," she says.

"We understood their logic; they saw debt as a negative," Fisher continues. "We don't like debt either, but a healthy debt plan enables growth."

So, yes. Taking on debt for a good reason (like leasing equipment you need to do more work) and not spending all of your available cash may help you avoid a money crunch down the road.

3. Lower your inventory to steer clear of cash-flow problems in a business.

David Altemir, owner of Altemir Consulting in Dallas, says that many businesses who hold inventory end up holding entirely too much, thus constraining cash flow.

“When you look at inventory, you have to imagine seeing stacks of dollar bills lying there on the warehouse shelves," he says.

“We've even seen Fortune 500 companies hold as much as seven times more inventory than is necessary to maintain high—for example, 99 percent—fulfillment rates with their customers.

"The challenge with planning inventory is to strike the right balance between not having too much and not having too little," Altemir continues. "This is true whether you are a distributor whose primary objective is stocking finished goods or a manufacturer who must maintain adequate on-hand raw materials."

Of course, striking that right balance is easier said than done. But to avoid cash-flow problems in a business, looking at how you manage your inventory would be a good start.

4. Examine your incoming and outgoing invoices.

Lax or faulty invoicing practices can really make it hard to dodge cash-flow problems in a business, says John Blake, a certified public accountant and partner at New Jersey-based accounting and advisory firm Klatzkin & Company LLP.

Ideally, he says, you should aim for getting clients or customers (who don't pay promptly for whatever reason) to pay within 30 days. If it routinely goes beyond that, you can expect your cash flow to suffer, he says.

“On the other side of the coin, don't rush to pay invoices the business itself owes. Take your time and pay the invoice right before the invoice terms dictate," Blake says.

Well-planned cash-flow budgets will begin to bring transparency to the monthly capital needs of the company, allowing the business owner to know how much cash to keep on hand for operations and to meet forecasted growth plans. 

— Emily Fisher, owner, Fisher, P.A.

While that may be what some of your customers are doing to you, if you're struggling, you may need to shorten the payment window on your own invoices.

5. Fire somebody and hire someone else.

If things are going really badly, you may need to let go of whoever is working on your books and replace them. Even if that's you.

“Many small-business owners find accounting and related financial matters to be intimidating, stressful or just plain boring," says Thomas J. Williams, an enrolled agent and tax accountant who owns Your Small Biz Accountant, LLC and is the co-founder of Deducting the Right Way.

If you're filled with dread every time you work on your financials, maybe you're not cut out to be your company's CFO.

“Based on those feelings, they pay little attention to their bookkeeping duties and are not able to see the warning signs that become readily apparent in well-maintained books," Williams says.

And, of course, if you have a CFO who has done a good job maintaining the books, and you're still having cash-flow problems... well, maybe sacking the CFO isn't the answer. After all, there may be issues that aren't the fault of your CFO, such as keeping too much inventory.

But whatever is causing the issues in your business, make sure you address them—because when it comes to cash-flow problems in business, it's always better to have more good months than bad ones. Nobody can last too long on thin ice, after all.

Read more articles on managing money.

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