Cash flow is the lifeblood of any business. A healthy stream is important if you want your business to succeed.
The key is to delay the flow of money that goes out and accelerate what’s coming in. Combining it with collection and written credit policies can also make a difference in increasing your business cash flow.
There are other ways you can consider for your business. This guide to cash flow will help you determine the different options on how to give your cash flow a boost.
- Hire a Bookkeeper or an Accountant
A lot of business owners try cutting back on costs by doing their own books. Since online accounting software makes it simple to manage the daily reconciliations, filing taxes yourself may seem to be easy as well. However, what you should know as a business owner is that a bookkeeper or an accountant can do more than just filing taxes.
These professionals know the tax rules, so they can ensure you’re compliant. They can also provide you a better visibility of the current financial situation of your business. Plus, they’re capable of pointing out any possible issues you haven’t seen or the patterns that could put your cash flow in danger. Accountants or bookkeepers are crucial to better understanding and managing your cash flow.
- Lessen Your Business Expenses
Keeping your business expenses low is good and can place you in the best possible position to embrace opportunities or make some investments that can improve and grow your business.
There are simple ways to cut costs in your business, including the following:
- Utilities – You can discuss with your utility service provider on how you can lower your bills. It may also help if you could go to them with a better deal from one of their competitors and see if that incentivizes them to match the better price. Most utility providers can change their pricing and packages within a year, so it’s best to review it on a yearly basis to ensure that you’ll get the best deal.
- Bank Fees – Consult your bank or any competing bank about the options your business can consider to make savings. If you’re switching banks, showing a package from its competitor may encourage it to provide you a more competitive deal.
- Look into Your Subscriptions – If you’re using software to manage your business processes, you can opt for a solution that covers everything from accounting to marketing rather than having several subscriptions that cover different tasks. Most of these solutions are now available on the market. The only thing that you need to do is to search for the one best suited for your business needs.
There are other ways to reduce your business expenses, but only if you’re willing to change your business model. For instance, you can let your employees to do their work at home while you use a smaller co-working space just for meetings to avoid paying expensive office rent.
- Have a Cash Reserve
Think of your cash reserve as your savings account for your business. Typically, you can keep 3–6 months’ worth of your operating expenses in your cash reserve, but you can always adjust the numbers based on what you’re planning to spend in the coming months. So, determine a smart amount for what you may need for your business operations and set it aside.
- Get Credits Only When You Need It
Once your business gets into trouble, it would be too late for you to find a cash injection to bail you out. So, it’s a good idea to set up a line of credit as early as possible and before you actually need it.
A line of credit may come in handy and can offer you flexibility. Like an overdraft, you may access the cash only whenever you need it. Usually, a line of credit is secured by a mortgage over a property. In addition, the interest rates are much lower compared to an overdraft.
- Follow a Budget
Businessman or analyst holding calculator while reviewing financial statements for business performance or cash flow analysis
This may seem obvious, but a budget is important for the overall health of your business cash flow. More often than not, business owners focus too much on the profits and not enough on their expenses.
Remember that you’re not getting ahead if the amount you’re making every sale can’t cover some of your expenses. So, save money when you can and track all of the spending of your business.
By using a tool or spreadsheet to keep track of your spending, you can easily break down the cash going back out and coming in. Plus, it can help you follow your set budget.
- Increase Your Prices
Increasing the prices of any services or products you offer can be another way to increase the cash flow of your business. Although it may result in decreased overall sales, it can be a good tactic to experiment with your pricing.
By increasing your pricing, you’ll be able to come up with the most ideal number since the goal is to determine the number of customers who are willing to pay for the price. Even if it’s risky, it may still help improve your cash flow, especially if the response from your existing customers is positive.
- Provide Different Payment Options for Your Customers
The more convenient you make it for your customers to pay, the quicker they’ll pay you. Besides, it’s easier for customers to handle their payments online while helping you get payments on time.
By providing your customers with different online payment options like accepting mobile payments and credit cards, the more transactions you’ll be able to benefit from.
- Perform Credit Checks for Your Customers
There are instances that your customers won’t pay you in cash. If they’re one-time customers and want to pay for a service or a product using their credit cards, that’s standard. But, if they’re paying a huge amount or for recurring items, make sure to perform credit checks beforehand. If your customers have poor credit, you might not get the payment in a timely manner.
You may want to make that sale to improve your cash flow. However, lack of payment or late payments may have a negative impact on the overall cash flow of your business. If you want to make a sale with somebody who has credit problems, make sure to set payments with a high interest rate.
- Discourage Late Payments and Encourage Early Payments
You must try providing your customers cash discounts as incentives to pay early. It’s a tactic that encourages your customers to pay as early as possible, which can help increase your business cash flow. On that note, you must also make it clear that, just like the early payments would be rewarded, the late payments can be punishable.
If you’re waiting on the overdue payments, sending out reminders and charging late payment fees that would add on the original amount automatically. This will encourage your customers to pay early and avoid paying late.
- Consider Expanding Your Sales Market
Another way to increase your business cash flow is to brainstorm new sources of income. Get your dream team together and consider the other ways to expand your company’s sales market.
There are some new sales possibilities to get your ideas rolling, which can help you manage your cash flow and these are:
- Make a New Marketing Strategy
If your offerings are already spot on, you can expand your marketing. Think of the new ways to spread the word about your brand. Consider the other groups of people that might benefit from your offerings. Bringing in more customers is one of the best ways to increase your cash flow.
- Add New Products or Services
Think of the current services or products you offer in the market. Then, consider if there are other items you may add to your growing collection. If possible, think outside the box to earn more income. For instance, if you’re running a coffee shop, you can start offering lemonade during summer. If you’re an event planning service provider, you may add a cleaning service to expand your offerings.
Get creative with the new ways your business can boost its income to increase its cash flow—the only limit is your imagination. But remember, it’s always best to add new products or services that are still related to your niche.
- Never Forget Your Loyal Customers
Another good way to expand your market is to let your happy and loyal customers do it for you. You can encourage them by implementing rewards programs or offering discounts. Moreover, consider implementing referral programs. In this way, you may encourage your loyal customers to spread the word about your business, which can be beneficial to make your business grow.
- Encourage Customers to Purchase More
Another good way to increase your business cash flow is to get your current customers to spend more. You can do this by offering bundle items. It works by selling similar products together for increased spending.
You can also consider advertising related products. If you’re using an eCommerce platform, you can advertise more products that the buyers might be interested in.
Both ways can be helpful in expanding your sales instead of expanding your entire sales market.
Bottom Line
Cash flow problems may affect your business negatively. Luckily, the above tips may help you improve and increase your business cash flow in no time. With better cash flow, it equates to a stronger business and greater opportunities for long-term success. Just make sure to follow and implement the above-mentioned tips properly to get the best possible results for your business cash flow.
