How to Improve Cash Flow for Your Small Business
Did you know that more than sixty percent of the world’s small businesses struggle with cash flow?
If you want to keep your business running, it is essential that you have cash at hand to do things such as pay your staff and stay on top of your monthly bills.
Unfortunately, many small business owners struggle to know how to generate the cash that they need.
To help you out, we’ve written a guide that breaks down the top strategies to improve cash flow. Keep reading if you are interested in learning more.
What Is Cash Flow?
Cash flow refers to the amount of money that is coming into and going out of your business. The most successful businesses can create positive cash flow during their regular operations.
Cash that flows into your business is known as inflow. This generally comes from revenue that business owners generate when they sell products and services. It is also possible to generate inflow by making strategic investments.
Money that flows out of your business is known as outflow. This generally consists of debt payments and business expenses such as paying employees, electricity bills, and mortgage payments.
Lease Instead of Buying
It might seem counterintuitive to lease instead of buy. This is because it usually costs more to lease equipment, supplies, and real estate than it does to purchase these things.
But it can be more difficult for people who buy their equipment, supplies, and real estate to maintain a cash flow for daily operations.
Those who choose to lease are able to pay in small increments. This improves their overall cash flow. On top of this, lease payments qualify as business expenses. Therefore, you can write these payments off on your taxes.
Give Discounts to Customers Who Make Early Payments
By giving your customers discounts for paying their bills early, you can quickly generate cash flow.
Perform Customer Credit Checks
There is a good chance that customers who have poor credit won’t be making their payments on time.
Even if you want to make a sale, you should keep in mind that late payments will negatively impact your business’s cash flow.
Therefore, you should make sure to set up these types of sales so that they have high-interest rates. You can easily do this when you are using POS systems.
Put Together a Buying Cooperative
There is power in numbers. Therefore, it is a great idea to collaborate with similar businesses that are willing to pool their money to negotiate lower prices with suppliers.
This is an ideal way to get huge discounts from your most important suppliers.
Improve How You Manage Your Inventory
Try to make periodic inventory checks. Take notice of the things that you purchase which are not moving as quickly as your other products.
These things can tie up more cash than you might realize and have the potential to hurt your cash flow.
Stop purchasing goods that are not selling. If you can, get rid of these things to free up more cash. You should do this even if it means selling these goods at a significant discount.
It is a good idea to focus on being objective instead of letting your emotions guide your decisions. Instead of waiting for the day when your inventory sees heightened demand, do whatever you can to get rid of these items.
Send Invoices Out Right Away
If you send your invoices out as quickly as possible, your receivables will come in much more quickly.
But you should first make sure that you know how to create a good invoice. Invoices should be easy to read and have clearly defined terms. It is a good idea to print the due date in several different locations.
You’ll also need to explain what types of payments you accept and what your policy is for late payments.
Choose Electronic Payments
You can wait until the day that your bills are due before you make payments if you use electronic payments. This can help to improve your cash flow.
It can also be helpful to use a business credit card. Many business credit cards have grace periods that last for up to three weeks. It might even be possible for you to get cashback.
You’ll just need to make sure that you don’t accumulate too much debt.
Raise Your Prices
Many business owners are hesitant to raise their prices because they worry that their customers will choose to take their business elsewhere.
But there is nothing wrong with experimenting with your pricing. You will eventually find the right number.
You will never know how much your customers are willing to pay for your products and services until you take a chance.
There Are Many Easy Ways to Improve Cash Flow
If you’ve been wondering how to improve cash flow for your business, keep in mind that one of the easiest ways to do this is by leasing instead of buying.
You should also consider making use of POS systems for your business.
If you are searching for cutting-edge Point-of-Sale systems, don’t hesitate to reach out to us today. We supply smart POS Systems and terminals for all your business’s credit card processing needs.
