Money is constantly moving in and out of a business, with customers paying for goods and services and employers paying employees. This is referred to as cash flow and it is important in both short-term and long-term planning.
Due to the role played by cash flow in business operations, business owners are constantly looking for ways to boost cash flow. There are several ways of doing this and here are 10 ideas for a business to boost its cash flow.
- Do Not Delay Invoicing
If you need to issue an invoice for customers to pay, any delays in issuing an invoice from your end can cause delays in payment, which will then affect cash flow. However, if you stay on top of the invoicing and send them to the customer as soon as they receive the goods or services, the sooner you can expect the customer to pay.
In order to speed up the process, you can use invoicing software, which will not only allow you to send invoices to customers but will also allow you to follow up and send reminders until the payment is made.
- Payments Due
Making sure your customers make payments on time is another way to boost cash flow. A business advisor may recommend giving customers incentives to pay on time, like a discount if they pay within a given period, or alternatively late payment penalties.
- Make Payments on Time
If you use various incentives and penalties to encourage customers to pay early, it is safe to assume that your suppliers also have similar strategies. If a supplier offers incentives for paying within a specified period, you can use this to your benefit. If a supplier charges a penalty for late payments, keep these in mind and make sure you pay when it is favourable to you but is not so late as to cost your business more.
- Re-evaluate Operating Expenses
Operating a business costs money but some operating expenses may be unnecessary. You may also be paying more when there are cheaper alternatives that are just as good. Taking the time to re-evaluate your operating expenses can be a great way to boost cash flow.
- Price Increments
Poor cash flow may be a result of poor pricing. When deciding on pricing for your products, consider what your competitors are charging and if your current pricing compensates for the time and effort that goes into production. A few other factors to consider are any negative effects low pricing can have and price increments of equipment or inventory along with any unforeseen future developments
- Expand Your Market
You may be doing everything right in terms of pricing, but may still not see enough sales. This can affect cash flow and should be addressed without delay. One of the first things to do is to study your records. If you make use of bookkeeping services from an accounting firm, you may access their advisory and reporting services as well. This may give you a new perspective of your financial performance, which will give you the insight required to make changes to your sales and marketing strategies and increase sales in different markets.
- Inventory Changes
Strategies to boost sales and expand your market are important but you may also need to consider your inventory. Identify products that sell quickly and those that have seasonal demand. If you have products that just did not sell, it may be better to liquidate old inventory instead of hoping they sell at some point.
- Buying or Leasing Equipment
For some businesses, it is cost-effective to lease equipment rather than purchasing them. However, some equipment must be purchased and this can have a huge impact on the cash flow of a business. Long-term financing can take this burden off to a great extent as you will not be paying upfront for the equipment in full.
- Use the Right Bank Account
A savings account for businesses can be a great way to boost cash flow as you can earn interest on the money you store in the account. This may be a method of generating cash that you did not consider but a business savings account can have several benefits.
- Use the Right Cards
In addition to the type of bank account you use, you must also consider the type of credit or debit cards you use. While conditions do apply, there are plans with various benefits and rewards depending on usage. A cash-back credit card, for instance, may have several incentives that improve your cash flow.
