10 Steps to a Healthier Cash-Flow for Your Small Business

If you own and operate a business, your sales are increasing at an exponential rate, and your profits are boosting at a rapid scale, you are most probably on the right path. However, don’t put your guard down. Even rising, successful businesses can be struck with cash flow issues if their investing, operations, or finance activities are not running smoothly.

For example, in case your payables (your debts) are due before your receivables (money from a sale you haven’t even gathered yet) coming in, you are bound to experience cash flow issues. This, in turn, means that you won’t be able to pay your bills on time, which can further result in more significant problems, such as creating payroll in a timely manner and getting questioned for creditworthiness. 

If you are looking to enhance your cash flow, consider executing some of the following steps.

1. Don’t Buy, Lease Instead

Since leasing real estate, equipment, and supplies typically turns out to be costlier than purchasing, doing so might seem counterintuitive to someone who is only concentrating on the bottom line or the total income after expenses are paid off. However, until and unless your business is filled with cash, you will have to maintain a healthy cash stream for your routine operations.

Through leasing, you pay in little increments, which assists in enhancing cash flow. An additional bonus is that lease payments are a business expense and thus could be written off on your taxes.

leasing money

2. Provide Valuable Discounts for Early Payment

People simply love incentives, and if you provide your clients with a discount, given that they pay their bills early, you are developing a win/win situation that is beneficial for everyone. Receiving the cash early greatly assists your cash flow. 

3. Conduct Credit Checks of Consumers

If a consumer is reluctant to pay in cash, make sure you perform a credit check, particularly before signing them. If the customer possesses relatively poor/low credit, it is fair to assume that you will be experiencing delays in receiving payments.

As desperately as you may want to make the sale, late payments will significantly hamper your business’s cash flow. If you decide to go for a sale in spite of any doubtful credit, make sure to set it up with a high-interest rate. 

cash flow

4. Make a Buying Co-operative

Think power in numbers, and try to locate other like-minded businesses interested in sharing their money to bargain for lower prices with the suppliers. They typically offer generous discounts for giant enterprises who buy in large quantities.

5. Enhance Your Inventory

Conduct an inventory check. Form an extensive list of goods you purchase that are not selling at a good rate as compared to your remaining products. These certain goods possess the ability to tie up plenty of money and could severely damage your cash flow.

Rather than purchasing more of what doesn’t often sell, discard it—doesn’t matter if you have to put it on sale. It is difficult to lose products that you are obsessed with, anticipating that their demand will magically go up one day, but that never happens. So, don’t be emotional; instead, be objective. 

business inventory

6. Send Out Invoices Instantly

You will notice receivables coming in at a rapid pace this way. Ensure you completely comprehend the fundamentals of how to generate a good invoice. Keep in mind that your invoices should have the terms clearly stated and must be easy to read. Put the due date, in bold, in more than one place. Make sure to add clear-cut guidance related to the accepted payment types. In case your business charges a late payment penalty, remember to include that information too.

7. Utilize Electronic Payments

If you are paying electronically, you will be able to have more time than usual for your payments too. For instance, you can wait until the morning of the day a bill is due to go ahead with payment. This entire process of buying time enhances the cash flow. You could also make use of a business credit card as some provide a grace period of around twenty-one days, which could help a great deal in boosting your cash flow. 

There is a possibility that you may even get a fair amount of cashback; however, don’t get yourself in too much debt. 

8. Pay Less to the Suppliers

If you manage to keep regular, friendly communication with the suppliers, you would possess a decent chance of landing good terms. Provide suppliers with an option of early payments only if they’re ready to give you a generous discount. Excelling in negotiating a good deal is a crucial part of conducting business and could assist you in convincing your suppliers to present you with a much more profitable deal. 

9. Utilize High-Interest Savings Accounts

This will offer you liquidity while simultaneously boosting your cash position. The most beneficial high-yield savings accounts provide interest rates that can be twenty-five times higher than the national average, which means that you will be earning more on the cash you’ve put aside.

Cash flow saving account

10. Boost Pricing

Boosting your prices is a concept that tends to scare off various business owners. And the reason for that is, they are afraid that it will result in decreased sales. No matter what you, as an owner, think, it is completely fine to play a little with the prices in order to figure out the perfect number. There is absolutely no way you can know how much high a consumer is willing to go if you’re not ready to take a chance.

Conclusion

Healthy cash flow is the result of operations that are run smoothly and efficiently. While executing a few or all of the above-mentioned strategies should assist you in boosting your business’s cash flow, you should also ensure that you are making the correct choices about your new consumer acquisition, services or product development, customer service, and marketing. That is why it is crucial to review and upgrade your business plan from time to time to make sure you foresee challenges and trends way before they hamper your profitability.