Cash flow is the life blood of small business owners. Many people have gone out of business by not watching their cash flow and, as a result, running out of cash. Managing the cash flow for a small business often feels like a constant struggle. While nothing is guaranteed in life, it’s important for business owners to have a certain sense of security when it comes to their cash flow. These useful tips will help you improve your cash flow:
- Lease Instead or Buy
When looking at the long-term ramifications of the leasing or buying question, it may make more sense financially to buy instead of lease. While it is less expensive overall to buy, if you don’t have the cash to manage your day-to-day operations, it doesn’t make sense to go into debt for property, equipment, or supplies.
Leasing, though it may be more expensive, allows you to spend less in the here and now. Since business owners have to pay to lease in smaller increments, this is often preferable to spending a huge chunk of money outright.
- Offer Discounts
Need more sales but not sure what to do? Incentivize your audience by offering more discounts. Whether you’re discounting your products with daily deals or you’re offering freebies if they pay ahead of time, giving customers incentives to pay you will get your cash flowing.
- Manage Your Invoices
Staying on top of your invoices will help you manage the payments that you are owed. If any clients are behind with their payments, it’s time to remind them of what they owe your company. Instead of letting unpaid invoices pile up, make it a point to actively pursue these customers and stay on top of these payments.
- Build a Forecast for Your Cash Flow
Cash balances never stay constant. If you hope to bring your company through the inevitable financial highs and lows, you need to have a forecast in place for your cash flow. You need to understand the where, when, and why of these highs and lows. The more information you have about these patterns, the better you can prepare for them.
Whenever you’re experiencing peaks in your cash flow, use that money to make more. By investing your excess cash, paying down debt, and saving this money, you’ll be able to better prepare your company for the eventual lulls in cash flow.
- Accept Credit Cards
Almost every major company accepts credit cards, but some small businesses still subscribe to the “cash only” mindset. If you haven’t started accepting credit card payments, you need to. While you may be weary of accepting credit cards, there are a countless method for securely accepting card payments. You’re doing yourself a disservice by requiring cash only.
With the likes of Stripe, Izettle, and Paypal, you can easily accept credit cards as a form of payment. These virtual terminals integrate easily with popular accounting software, so you have no excuses anymore to avoid accepting credit cards.
- Use Milestones or Upfront Payments
When accepting a new contract, try to haggle for an upfront payment or milestone payments. Depending on the project, some clients may be perfectly fine with paying you upfront. If your clients aren’t ready to give an initial payment, set up milestone payments. This way, your clients will pay in milestones throughout the length of the project.
With a milestone strategy, you can guarantee that cash keeps coming as you work on their project. Whether you choose an upfront or milestone payment, both options make it easier to complete the work instead of waiting until you’ve completed all of the work.
- Pay Suppliers Slower
While it may seem strange for you to ask if you can pay a supplier slower after you ask your clients to pay you earlier—it’s just business. Your suppliers are happy to have the business and will likely be willing to work out a payment plan with extended terms. The best way to secure this kind of deal is to form a long-term relationship with your suppliers.
The better a supplier knows you and your business, the more likely they are to be flexible with your payment schedule. This is especially helpful for startups that may be having a difficult time trying to earn credit and turn a profit.
- Look into Financing Options
Many small business owners rely on financing options to get their companies off the ground. If you’re tired of being in the continuous cycle of being cash poor and cash rich, looking into financing options may be the solution for you. Do your research and speak with an accountant to make sure you pick the best financing option for you.
While taking out a loan can help you in the short-term, it’s important to exercise caution. If you aren’t bringing in enough cash now and you stay cash-poor, you won’t be able to pay the loan back. When you combine this outstanding debt, the interest, and your other business expenses, you’ll be worse off financially than you were before.
- Opt for Different Streams of Income
Stuck in a cycle of cash flow peaks and troughs? While you could accept that this is the way things will be in your business, you also have the option of diversifying your income. For example, if your primary business is selling clothing, you can make more money by offering a subscription-based service that sends a box of clothes to customers each month.
The more creative you get with your products and services, the more money you’ll bring in. Whenever you Are cash-rich and you have multiple sources of income, you’ll be able to comfortably operate your business knowing you have money to put away for the future.
- Don’t Overstock Your Inventory
While it may be tempting to stock up on products so you can be ready for an eventual increase in demand, doing so only translates to letting your hard-earned cash sit in your stock room. If you aren’t selling out of these products on a regular basis, it doesn’t make sense to get more than what you need.
If you find that the demand does increase, you can make adjustments to your orders accordingly. Having interested buyers on a wait list is better than having thousands of dollars of unwanted products in a stock room.
Small business owners face an uphill battle when it comes to financing and cash flow. If you’re looking for the best way to bring in more cash for your business, keep these 10 tips in mind.
