It’s pretty rare to come across a small to medium sized company that hasn’t had some ‘cash flow problems’ at some stage. Even the large corporations aren’t immune to having to tighten the purse strings. Real estate agencies, just like every other business, are at risk of running out of money if they don’t have backup funds they can draw on.
Let’s take a look at why businesses and agencies might face financial challenges, and some ways you can avoid having to mutter “…if we only had a bit more money…”
Why business run out of cash
1) Rapid Growth
Every business owners’ dream is to have their business booming! But there’s a downside (unless you’ve got a huge pot of gold). Real estate agencies that grow quickly also have the cost of increased overheads – materials, equipment, staff, expanded facilities, etc. and have to lay out funds for these before they reap the rewards of their sales.
They deplete their cash supply so they can make sales, then have to wait to receive commission payments while their bills pile up. Without a cash flow injection, these businesses will struggle to keep operating as they wait to get paid.
2) Lending restrictions
This has always been an issue for small businesses, but restrictions seem to have tightened since the GFC. Banks have intensified their lending criteria, which has affected many small and medium enterprises (SMEs).
Banks and traditional lending institutions continue to make it more difficult for businesses to take out loans or raise their credit limits. Some banks avoid certain industries altogether. Banks usually won’t lend money to businesses with limited collateral either.
3) Seasonality
Many businesses have a booming sales period and a very quiet time of the year. For real estate, seasonal fluctuations can also result in a housing price drop, making the quiet times even harder.
This is where good budgeting skills are essential. Managers need to know that when business is going really well, it’s vital to save some of that money to pay wages and expenses when times are not so fruitful.
4) Expenses not being monitored
As you get on with business, there often comes a time when you notice that your expenditure has changed. Perhaps you’ve spent more money on marketing than normal, or your supplier prices have increased.
Unless you consciously monitor your expenditures regularly, it can be easy to miss the fact that you’re spending a bit more than usual, when incoming funds haven’t increased at the same rate.
5) Delays in settlements
It’s a common scenario in real estate that you put in a lot of hard work to sell a property, and then, for various reasons, there is a delay in settlement. Sometimes it’s only a few days, other times it can be weeks or even months. This obviously means a delay in you receiving your commission and can cause serious cash flow issues when you’re counting on funds to arrive and then they don’t.
What you can do when you’re strapped for cash
Before hitting the panic button, it’s a good idea to ask yourself some questions.
How serious is the problem?
Look at where you are right now. How much money do you have in the bank and how much can you draw on easily from savings? Then make a short projection of money coming in during the next few weeks and money due to be paid out. This will give you an idea of where you’re headed and how fast you’re getting there.
Can you conserve cash anywhere?
Make a quick plan that reduces spending and increases the amount of cash coming in. Don’t let expenses go unless it’s absolutely necessary, but delay the spending as long as you can. This may mean leaning on your creditors, but that’s better than running out of money altogether. If you can speed up any items of cash income, do so.
Is there a temporary solution?
If you’re running short of money, chances are it’s not a simple problem, and there may not be a simple solution. Since you probably don’t have the luxury of time, you can’t sit around doing long, drawn-out analyses and problem fact-finding. You need to develop at least a short-term solution fast. Commission advance is a perfect solution in this scenario. It’s available within a few hours of an approved application.
Remember, running out of money in business is a common problem. You’re not the first to experience it, and you won’t be the last!
Is there a long term solution?
Cash flow problems are not really problems – they’re symptoms of a problem. The cash shortage is just an indicator of a problem.
The problem may be too few people wanting to sell their properties, insufficient buyers, excessive expenses, poor marketing, or any number of other causes. Getting more money will not cure a cash flow problem that’s being triggered by one or more of these other causes. It may reduce the pain for a time, but it will return.
Finding a longer-term solution is what business decision making is all about. That way you know you’ve got the upper hand and you have an absence of these dreaded ‘cash flow problems’. Commission advance may be the short and long term solution you’re looking for. It’s readily available and can solve any of your immediate cash flow issues.
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