Improving Your Business Cash Flow

As a small business owner, you, of course need sales to keep growing in order to keep profits increasing. Even if things have been improving, you still shouldn’t put your guard down. When businesses are growing, then profitable companies can face some problems with cash flow. When this happens, then it can impact finance, investing, and operations, and hinder them from working efficiently. 

As an example, if your debts, or payables, are due before you get money that you are owed, then you can quite quickly face cash flow problems. When there are late payments, then you won’t be able to pay your bills on time. If you can’t pay staff or bills on time, then it can hinder your business massively, and could even mean facing some questions around your creditworthiness.

That is why budgeting and keeping your records straight can make such a difference. If you are taking care of accounts yourself, then you need to make sure that you are budgeting well. If you aren’t able to, then it could be a good idea to outsource your accounts and bookkeeping to someone else, in order to keep things on track. If you find a bookkeeping pricing package to suit you, then it can make a big difference in keeping up with your cash flow, receivables, and payables. 

If you are looking for other options, then here are some of the things to put into place to improve your cash flow.

Lease, Don’t Buy

It can cost more money in the long-term when you lease equipment, so this can seem a little counter intuitive when you are looking to keep your costs down. However, if you are wanting to pay close attention to your bottom line, then leasing can be much more effective with cash flow.

Buying things up-front, especially if they involve a lot of money, can put you into some debt before you have the business off the ground. Leasing will allow you to maintain more of a stream of cash for your day-to-day operations, and you’ll know what money you need each month for the rentals. You pay in small amounts when leasing, which can go a long way to help to improve cash flow. Another aspect of this is that leasing can also be classed as a business expense, so it can be an element that can be written off when you file your tax return. 

Offer Discounts for Early Payment

When you invoice a customer or client, some people will pay right away, but there will be others that wait to pay right up until the last day. That is why, in order to help your cash flow, you could incentivise people to pay early. Who doesn’t love an incentive? If you are able to offer your customers a discount for paying early, then it can create a situation that is a win-win for you both. They will feel good getting a discount, but you will get the cash in early, helping with your cash flow and your budget.

Conduct Customer Credit Checks

This can depend massively on what your business is, but if required, it can be helpful for your cash flow to conduct customer credit checks. You might have some customers that don’t want to pay in cash. If this is the case, then you need to be sure that you conduct a credit check.

If the client doesn’t have a very good credit rating, then it can be safe to presume that they are a little more likely to have missed payments or payments that are not made on time.

No matter how much you want to get a sale and get some money in, if the person offering this to you isn’t likely to make those payments on time, then it may not be worth it. The cash flow of your business can be hindered by late payments and missed payments, as well as the taking time and effort to chase things like this up.

Form a Buying Cooperative

There is power in numbers. It can help to find some like-minded people or businesses who are able to help to pool their cash, and to help to haggle some lower prices with suppliers. This can also help get some discounts for larger companies who are able to buy in bulk.

Improve Your Inventory

It is a good idea for all businesses to keep an eye on their inventory. However, when it comes to cash flow, this is something that really can make a difference. It is a good idea to start with a list of the items that you buy and sell, but that aren’t doing as well as some other products. These kinds of products can tie up a lot of your cash, and as a result, can impact your cash flow.

So, instead of buying more items that aren’t selling as well, it can be a good idea to go through your inventory and get rid of it. This will mean selling it off at a discount in most cases, but in the long-term, it will help with cash flow. It can be hard to say goodbye to things that aren’t selling well, especially if you are a big fan of them! So be objective, bear cash flow in mind, and think about what you could invest in and buy now that there will be some more cash (and space). 

Send Invoices Out Immediately

It can be easy to put off sending out invoices. However, you are going to see your money come in much more quickly when you send out your invoice on time or immediately after the fact. There is no excuse for a customer or a vendor not paying when they have had the invoice in their care for a while, so get the invoice out early.

On the subject of invoices, it is a good idea to understand the basics of an invoice, to make sure that things like the terms and conditions are stated clearly. It is a good idea to put due dates on your invoices, and have that written in a few different places. You should also include some clear instructions on how someone should pay you, and the variety of ways that are accepted. If a customer has questions around payment and the invoice, then it will delay the whole process further. You should also state late payment fees, so they know what to expect when something isn’t paid on time.

Use Electronic Payments

When you are paying for something electronically, it can buy you a little time, especially if you’re awaiting a bill to be paid. You have until the next day for the money to clear, on most occasions, which can be helpful when things are particularly tight. You could also consider using a business credit card for your spending. The reason that this could be a good idea is that it will give you a grace period, which could last for weeks, depending on your provider, in order to pay.