The Ultimate Cash Flow Improvement Guide
Every business struggles with cash flow issues at one time or another, but that doesn’t mean you have to accept them as part of your business. There are so many things you can do to improve cash flow within your business, and this ultimate cash flow improvement guide is here to help you.
Make The Receipt of Cash Faster
Don’t wait to send out your invoice. Make sure you send them out immediately after the delivery of goods or services. You could also change your payments terms. Many businesses have terms that outline 60 days, but you could change yours to 30. To give customers a better incentive to pay on time, offer a small discount. Make sure you take the time to follow up with late payers too. The mistake many businesses make is simply invoicing once and then waiting patiently. If you struggle to send out invoices promptly, it may be that your invoicing system just isn’t up to scratch. Using an app for invoicing could revolutionize the way you collect money from your customers. Getting paid will become far easier when you take advantage of technology on the market.
Use A Business Credit Card
Using a business credit card to pay suppliers to make purchases means you’ll have a little longer to pay the fees, and you may also be able to enjoy cashback features that will be beneficial to your business. Speak to a professional business banker and they should be able to tell you which type of credit card is best for you. This type of credit is better than a loan as you’re able to access it faster, and they’re great for short term emergencies. The rates are usually very competitive.
Encourage The Use of Payment Cards
Accepting credit cards and debit card payments may be appropriate depending on the nature of your business. You’ll then have the cash that you’re owed the next day and you won’t need to put your hands on any checks or make any deposits. However, if you’re looking to improve cash flow you’ll also want to pay close attention to the cost of merchant services.
Lease, Don’t Buy
In some cases, leasing can be more expensive than buying. However, unless you have a ton of money within your business, you’ll find leasing is a better way to improve cash flow. You’ll be able to pay in small increments, and remember that you can write these payments off as business expenses.
Performing Credit Checks on Your Customers
It’s probably rare that a customer wants to pay you in cash. Most people pay with a card or a check today. Make sure that you conduct a credit check on customers before you allow this, especially before you sign them up. If they have poor credit, then you know you won’t be getting your payments on time. Of course, you want to make the sale, but a late payment will still hurt your company’s cash flow. The only other thing you can do is set the sale up with a high interest rate if you absolutely must still need it.
Consider Creating A Buying Cooperative
If you can find similar companies who are willing to put their cash together to get lower prices with suppliers, you’ll all be able to enjoy large discounts due to buying in bulk. The more you buy, the better. So, having connections and being able to network in your industry is a must. Then it’s up to you to haggle the price. If you maintain great relationships with your suppliers in general, then you’ll have a much better chance of getting favorable deals with them. You could even offer suppliers early payments if they’ll give you a great discount in return.
Open A High Interest Savings Account
Opening a high interest savings account will help you with liquidity while you grow your cash position. You’ll earn money on the cash that you do have, but you’ll be able to access it any time you need to.
Performing Inventory Checks
Go through your inventory and see if you can find products that just aren’t selling very well. These items tie up a lot of cash in your business, so do what you can to get rid of it. Even if this means you have to sell it at a discount, make sure you do what you can to get the products moving. The key is to avoid being emotional and become objective instead.
Raise Your Prices
Putting your prices up might sound terrifying. It’s totally natural to worry that you won’t make any sales if you do this. However, you can experiment with your pricing to find the perfect number and see how high your customers are willing to go. Many businesses that do this discover that they end up doing less work and making more money. Don’t underprice yourself, make sure you know your value.
Analyze Your Cash Flow
All businesses go through highs and lows. Some companies have their best months around events like Christmas, while some companies that supply items for schools always do better at the start of a school year. By analyzing when your best months are, you’ll be able to arrange staff, boost your marketing efforts when it’s quiet, and time your borrowing perfectly.
Find A Good Accountant
You need to make sure you’re looking at working with an accountant as an investment, not an expense. An accountant will be able to take a look at your cash flow projections and results and provide insights into areas that you could have overlooked. You can then plan for cash flow problems and come up with solutions together. Working with somebody like this is great as they aren’t as emotional about your business as you are. This means they’re better able to look at the bigger picture and provide better insights.
Try Continuity Sales
A popular way of improving cash flow are continuity sales. This is where business owners offer deals on products and services to people who buy for a fixed period of time. For instance, this may be a subscription based product like a magazine. You pay upfront for a year, for instance, and then you get a much better deal on the cost. This can work for almost anything. Many people now offer this service with beauty products, offering to deliver them once per month for a discounted price.
Put Money Back Into Your Business
Although you’re trying to improve your cash flow, you shouldn’t be tight with your money. Investing in your business is one of the best ways to improve cash flow, as you can improve your marketing, train your staff, and do beneficial things to your business that will help it grow and earn more money when you look at the bigger picture.