No business owner wants to hear the phrase “cash flow problems.” It’s the last thing you want to deal with when you’re trying to run a successful company.
But the truth is, cash flow problems are one of the most common issues businesses face. In fact, according to a report by Dun & Bradstreet Credibility Corp, 82% of businesses that fail do so because of poor cash flow management.
The good news is, there are things you can do to improve your business’s cash flow. By following the tips below, you can keep your business running smoothly and avoid any major financial problems down the road.
1. Keep a close eye on your invoicing and accounts receivable
One of the best ways to improve your business’s cash flow is to keep a close eye on your invoicing and accounts receivable. Make sure you’re billing your customers promptly and chasing up any late payments as soon as possible.
If you’re not already using accounting software, now is the time to start. Accounting software can make it much easier to keep track of your invoices and receivables. And, most importantly, it can help you get paid faster.
2. Review your pricing
If you’re not making enough money on each sale, it’s going to be difficult to improve your cash flow. Review your pricing to make sure you’re charging enough to cover your costs and generate a healthy profit.
If you’re not sure how to price your products or services, there are a few different methods you can use. Cost-plus pricing is one option. With this method, you simply add a markup to the cost of your goods or services to reach your desired price.
Competitive pricing is another option. With this method, you base your prices on what your competitors are charging. This can be a helpful way to ensure you’re not overcharging or undercharging for your products and services.
3. Offer discounts for early payment
If you want to get paid faster, offer your customers a discount for early payment. Many businesses offer a 2% discount for invoices paid within 10 days. This is a great way to encourage your customers to pay their invoices quickly and improve your cash flow.
4. Get creative with financing
There are many different financing options available to small businesses. And, with a little creativity, you can use these options to improve your business’s cash flow.
One option is invoice financing. With this type of financing, you sell your invoices to a lender in exchange for a cash advance. This can be a great way to get the money you’re owed quickly and improve your business’s cash flow.
Another option is equipment financing. If you need to purchase new equipment, you can finance it through a lender. This can help you free up cash that would otherwise be tied up in the equipment.
5. Improve your collections process
If you’re not effectively collecting payments from your customers, it’s going to be difficult to improve your cash flow. Review your collections process and make sure you’re taking the right steps to collect payments quickly and efficiently.
One way to improve your collections process is to use accounting software. Accounting software can help you automate your invoicing and collections process. This can save you time and help you get paid faster.
Another way to improve your collections process is to outsource it to a collections agency. Collections agencies specialize in collecting payments from customers. And, they can often get the job done much faster than you could on your own.
6. Manage your inventory carefully
If you’re carrying too much inventory, it’s going to tie up a lot of cash. And, if you’re not selling through your inventory quickly enough, you could end up with obsolete items that are difficult to sell.
To avoid these problems, it’s important to manage your inventory carefully. Keep a close eye on your sales and make sure you’re not carrying too much inventory. Also, consider using just-in-time inventory management. With this method, you only order the inventory you need when you need it. This can help you avoid carrying too much inventory and tying up too much cash.
7. Review your expenses
If your business is spending too much money, it’s going to be difficult to improve your cash flow. Take a close look at your expenses and see if there are any areas where you can cut back.
One way to reduce your expenses is to negotiate with your suppliers. If you’re paying too much for the goods and services you need, reach out to your suppliers and try to negotiate a better price.
Another way to reduce your expenses is to simply cut back on the things you don’t need. If there are any expenses that are unnecessary, get rid of them. This will help you free up cash that can be used to improve your business’s cash flow.
8. Get a business credit card
If you’re having trouble paying your bills on time, a business credit card can be a helpful tool. Business credit cards often have 0% introductory rates for a period of time. This can help you free up cash to pay down your debts and improve your business’s cash flow.
By following these tips, you can improve your business’s cash flow and keep your business running smoothly.
