Ensuring your business’s cash flow is healthy is essential for keeping things running smoothly. After all, poor cash flow management can lead to a whole bunch of issues that could ultimately result in business closure. More than 80% of business failures are due to poor cash flow.
Taking a proactive approach to cash flow management is paramount. There are some effective strategies, outlined below, that you can take on board that should help to move your cash flow in the right direction.
Get Paid More Quickly
Making a sale is good, but it won’t positively impact your cash flow until the money is actually in your account. Some customers can be a little slow to pay, and all the while, you’ll run the risk of falling into risky cash flow territory, especially if there are multiple customers who are dragging their feet.
There are a few ways businesses can get paid more quickly. One way is to ask for an upfront payment, either in full or a partial payment. You can also get a small discount for early payment of invoices. That alone will likely prompt a fair amount of your customers to pay within your established payment timeframes.
Improve Inventory Management
Improving inventory management can have a significant impact on cash flow, since it can prevent having your money tied up in slow-moving inventory. Ensuring that your stock levels are optimised will free up cash that might otherwise have been spent on inventory that stays sitting on your shelves. You can make managing your stock levels easier by utilising inventory management software, which offers detailed stock-quantity insights that can prevent overstocking. This software can also highlight the products that are selling well, allowing you to invest more of your capital into those products and ultimately boost revenue.
Look at Leasing Options
A single piece of equipment can have a huge impact on your cash flow, instantly transforming your cash flow from ‘healthy’ to ‘risky.’ There are situations when you simply need to have a piece of equipment, however, such as when the item will allow you to work more productively or take on higher-paying jobs. In that case, it’s best to look at leasing the equipment, not buying. That’ll give you access to the equipment you need without having to break the bank. The only downside is that you won’t be able to classify the equipment as an asset, but if the cost is high enough, then that’s usually a worthy trade-off.
Review Your Expenses
Finally, many businesses can improve their cash flow by simply reviewing their existing expenses and looking for opportunities to minimize their costs. It’s usually possible for well-established businesses to find opportunities to cut back on expenses. Speaking with your suppliers to get more favourable rates or better payment terms can also be effective. Ultimately, your cash flow will improve either by boosting sales or cutting back on your expenses. Take a look at where your money’s going and look for cheaper alternatives — or remove it altogether.
