If you are a business owner and your sales and profits are increasing significantly yearly, then you are doing everything properly. However, this should not be a reason for you to lower your guard. Not only small businesses face cash flow issues. Even profitable businesses can experience problems with cash flow when their operations, finances, and investment strategies aren’t going as planned.
Read on to learn about these seven tips on how to better manage your cash flow.
1. Lease Instead of Buy
As a business owner, you should consider leasing new equipment instead of purchasing them. This will help you avoid the large costs of this equipment. You can rent equipment for a monthly fee and make small payments that won’t affect your business’s cash reserves. Before weighing up the pros of buying vs leasing, you have to review the costs of maintenance and repairs of equipment owned by the business.
2. Consider an Inventory Check
By regularly taking an inventory check, you can discover those goods you previously purchased that aren’t adding up to sales. These goods take up a lot of cash and could ruin your business’s cash flow. Instead of hoarding goods that don’t sell, you can consider getting rid of them, even if you have to sell them at a discounted price.
3. Avoid Unnecessary Spending
Business expenses can be a hassle to deal with. Each expense might be easy to handle but when they are all combined, that could turn into a real problem for your cash flow. You have to dedicate time to managing these business expenses and avoiding unnecessary spending along the way.
4. Consider Offering Discounts
Think of discounts as baits to lure customers. Everyone loves incentives. You can offer customers discounted prices on items purchased ahead of time. In this situation, both you and your customers win. And of course, receiving the cash early also improves your cash flow.
5. Immediately Send Out Invoices
Sending out invoices on time makes receivables come in much faster. However, you have to understand how to prepare a proper invoice. You will want any invoice you are sending out to be clear and easy to read. You can include instructions about the accepted payment types. You can also state the due date clearly at the top and also the bottom of the invoice.
6. Consider Electronic Payments
If you make payments electronically, you can delay until early the day a certain bill is due to pay. This delay improves cash flow. You could also consider a business credit card, as a few of these offer up to 21 days of a grace period, which can do a lot for your cash flow. However, ensure that you don’t incur too much debt.
7. Pay Less to Your Suppliers
If you have a friendly relationship with your suppliers, then you have a great chance of getting better terms with them. You can offer your suppliers in-front payment if this means you are given a discounted price. Learning how to negotiate is imperative for every business. This could get you a better deal with your suppliers.
Proper cash flow comes from a smoothly and efficiently run business. While implementing these tips above is proven to increase your business’s cash flow, you could also look to hiring a virtual CFO to make it all even much easier.