Cash flow is the lifeblood of your business, but it can be a challenge to keep that cash flowing with all the other delays, downturns, and other economic challenges you face. While it’s easy to say something trite about just “making it work,” the realities you’re facing in our current economic climate have already been enough to cause a record number of businesses to close their doors and/or to see huge and devastating effects to their business credit rating.
Your first instinct may be to say, “So what?” We all know that cash flow is important, and we know that lots of businesses went belly-up between 2020 and 2021. You’ve survived, so you were either lucky or you were doing something right. In spite of, or because of, the recent economic upheaval, it’s now more important than ever that you are aware of and take special care to improve and protect your business credit rating. So, why is it so important?
Why Does Your Business Credit Rating Matter So Much?
Your business credit rating is one of the most important factors for the success and growth of your business. Without a good business credit rating, you’re more likely to be one of the 27% of businesses unable to get the funding you need to grow your business.
It’s already true that some 46% of all small businesses simply rely on their personal credit cards, but that’s also due, at least in part, to the fact that 45% of owners did not even know they had a business credit score. And, of the business owners who were aware of the rating, 82% didn’t have a clue of how to interpret it and 72% didn’t know where to find details about their business credit score.
How Do You Keep Cash Flowing Without Adversely Affecting Your Business Credit Rating?
Now that you know the importance of your business card rating, how can you really focus in on keeping your cash flowing without damaging that score? Most of these tips are things you’d probably consider to be fairly basic as part of your business planning and strategy, particularly as your business faces increasing challenges. Even if they seem basic, you should still write them down, verbalize them, and make these tips a part of your business plan moving forward.
Expedite Product Deployment
What does that mean? Get your product out the door faster. Don’t wait to deliver services. Cram as much into the time you have, without overtaxing your supply chain and workforce.
Particularly right now, you probably have a bit more leeway, so do what you can to slim those deliverable estimates and let your customers know the ways you’re working to serve them better.
Make it J.I.T.
That’s Just in Time if possible! With erratic supply chain issues over the last year, you may have pulled away from this type of manufacturing system, but it does give you more margin to play with for your cash flow. What does that mean? If it makes sense for your business, consider purchasing the necessary parts, materials, etc with delivery right before you need them.
If you determine that this is a good model for you, it’s important that you stay on top of variable costs. If some parts or materials appear to be skyrocketing in cost, it might make sense to purchase a larger quantity to keep your cost consistent until you see another leveling off in the per-unit cost.
It might be a bit complicated to compare your current budget with what you saw last year, but you should still be on top of the month-to-month fluctuations from one month to the next.
In particularly turbulent or uncertain times, you know on a weekly basis where you stand as far as cash flow, profitability, and even growth. If you keep on top of it, you will know where those upturns (or downturns) happened, and you can immediately turn on a dime to mitigate the challenges or build upon your successes.
Use Invoice Factoring
With invoice factoring, you no longer have to wait for your customers to pay their outstanding invoices. You can convert those unpaid invoices into working capital. So, instead of chasing down your billables, you can start putting your money to work for you, helping you avoid delays in payroll, inventory, and utilities.
Of course, the added benefit of invoice factoring is that you can more easily plan ahead and start to invest in the opportunities that will mean growth and continuing development for your business.
Work Your System
If you’re building on your successes, you’re aware and ready to take advantage of growth potential as well as make adjustments to mitigate the effects of loss. A big part of that is understanding your customer base, connecting with them, and continuing to deliver and improve upon what they’ve already demonstrated that they want and need.
Since it’s easier to keep an existing customer than to bring on a new customer, it’s super essential that you retain your customers as not only a strategy to keep the cash flowing, but also to maintain the consistency and continuity of your business model. With a consistent customer base, you also have the opportunity to continually move those loyal customers to additional products and services that will be of value to them.
While upsell opportunities typically vary depending on your business, it’s a great opportunity to deepen your relationship with your customers and give them more of what they’ve been asking for (and needing). If your upsell in product(s) or service(s) relates to survey results and/or what your customers have been requesting, it’s a great time to remind them you rely on their advice and input and to thank them for their continued support even during difficult times.
With careful planning and deliberate strategy, you can streamline your business processes and procedures, get employee buy-in, and garner rave reviews from your customers as you navigate the maze of cash flow pitfalls and business credit rating red flags. Here are more ways to deal with cash flow issues with your business.