Best 14 Ways to Improve Cash Flow in Your Small Business
That cash flow is the lifeblood of a business is not in doubt. Your business needs to have a healthy cash flow, that is, more cash coming in (as revenues) than going out (as expenses) for it to operate effectively.
This post presents the best ways you can improve the cash flow situation of your small business and get it out of debt and imminent collapse.
Cash flow management is one area no small business owner should fail in if they are going to have a successful business.
So, if you are ready, here are top 14 ways you can use in making more cash available to your business than what goes out:
How to improve your business cash flow in 14 ways
1. Take a Regular Inventory Check
It helps to know the available stock of goods in your store; goods that are quick to sell; essential goods; and goods that have become obsolete.
You will be able to get important information about your goods by sorting out your inventories.
The information will enable you to carry out the necessary action that will result in more sales, which means more cash inflow to your business.
2. Sell or Retire Equipment or Excess Inventories that are Antiquated
You need to be objective when sorting out obsolete goods; holding on to some old goods with hope that they will be purchased eventually or the fear that they will be sold below the original value is not a good enough reason to keep them in stock as they tie down capital and cause a negative cash flow.
3. Cut Back on Utility Expenses
Take a look at your spending on utilities and see areas where you can cut down on without any negative impact to your business.
Arrange your expenses in order of priority and keep close tab on them; see the one(s) you can easily reduce or eliminate to keep down spending and save your cash.
4. Lease Equipment rather than Buying a New One
When you are in a situation where you really need to conserve cash, you can consider leasing the equipment that you need for your business operation rather than buying them. This is, if it is possible to lease such equipment.
This helps you to keep the cash you would have spent in purchasing the equipment and that will boost your cash flow situation.
5. Make Use of Mobile Payment Solutions
Technology has made life a lot easier even in the business world to the extent that you donâ€™t have to pay or receive cash in exchange for service charge.
There are several Internet and mobile payment apps like Square card reader, Intuit Go payment, and Pay simple, which allow either swipe cards or debit cards on computers, android phones, iPhones, etc.
These applications allow quick payment to your business after services are rendered or products sold to customers.
This helps businesses to swell up their cash flow easily and quickly and to come up with effective marketing strategies that enable them to increase sales.
6. Offer a Discount for Quick Pay
Another very effective way to improve your business cash flow situation is to offer discounts on the prices of your products or services.
You can choose special days like Thanksgiving and Independence Day to offer your discount so it wonâ€™t look like your product or service is being devalued.
By offering special discounts, you can get customers to pay quickly ahead of normal billing cycle and/or to buy more of your products, which will increase your sales and improve your cash flow.
In addition to being of benefit to you, offering discounts will also help your customers to save money.
7. Apply for a Business Line of Credit
In order to protect your cash flow, it is needful to apply for a line of credit as it offers financial flexibility.
This will allow you to make whatever expense necessary to be made such as purchasing equipment.
For example, lines of credit like Ondeck offer financial options set up for small businesses to help overcome short term cash flow challenges.
However, you need to ensure you have a plan written to guide you on how you will use the loan effectively before you apply for it.
This will help you to avoid making mistakes and running into debts.
8. Operate Savings Accounts with High Interest Rates
Having and operating a bank savings account with high interest rate for your business can also help in improving your cash flow.
You can find out the right savings account for your business, the requirements to open one, and other necessary information you need to have by approaching the banks.
9. Set up Recurrent Subscription for Sales
If your business allows it, you can consider setting up a recurrent billing system for your subscribers.
By this, you are always sure of cash coming in each month, quarterly, or annually as the case may be as your subscribers renew their subscription.
And the more subscribers you have, the more cash comes into your business, giving it a healthy cash flow.
10. Renegotiate your Fixed Debts to Lower Payments
If you have a business debt that you are servicing, you can consider renegotiating the loan to a lower interest plan.
You can contact your bank or financial advisor to guide you on the options you can explore to be able to lower your interest on your existing loans.
Paying a lower interest will help you to save money for your business and improve your cash flow position.
11. Request Deposits on Large or Custom Orders
If you have to deliver a large or custom order to a customer before being paid, you should request for a deposit payment first.
You can ask for minimum upward payment of 50% of the deal to enable you meet certain expenses while saving your cash, as well as to prevent running into financial loss in the event that the deal runs into problem.
12. Invoice Timing
Your businessâ€™ invoice practices can affect how quickly your customers pay for their subscription or service that you have rendered, and this could also affect your cash flow.
To improve on getting your customers to make payment quickly, you should raise the invoice way before the payment is due, like a month before and inform the customer about it.
You can then send another notification (by email, etc.) to the customer a few days to the payment date (like 10 days); and lastly, another notification 24 hours to the due date for payment.
By this kind of practice, you will more likely be able to get your customers to make payment before or on the payment due date, which gives your business cash flow a boost.
13. Implement Cash Flow Budget
A cash flow budget is simply an estimate of expected cash into the business against expected spending over a period of time, say monthly, quarterly, or yearly.
The detail you will get when you make a cash flow budget will reveal interesting information about your businessâ€™ possible future cash flow situation.
You will immediately see if your business will have a healthy cash flow or not.
You will be able to see areas to make adjustments to if your cash flow is going to have problems.
14. Invest your Profit in your Business
As a small business owner, you need to make sure your cash flow is strong and stable and one way to achieve this is to retain as much cash as you can, including profits.
You might consider investing your profit in the business instead of cashing it off the business.
Maintaining a positive cash flow is an important aspect of making a business successful and every small business owner must learn how to achieve it.
By applying the ideas shared in this post, you are sure of improving your cash flow and having a solid and stable business.