Most businesses will encounter cash flow problems at some point in their lifetime. Whether you’ve been left waiting on a late payment from a client, or funds are simply running low towards the end of the month, difficulties of this sort are indeed far more common amongst small businesses than you may of first thought.
Temporary financial issues can become a real problem if the right provisions aren’t put in place to prevent them from reoccurring in the future. Luckily for you, there are a number of effective ways in which you can improve your business’ cash flow:
Too Much Stock?
While stock-piling popular products may at first seem like a sensible decision, bulk buying stock may not be so sensible if it is going to leave your business out of pocket come the end of the month. You should only ever stock-pile if the information from your previous sales report stands to indicate a strong likelihood of future sales.
Whilst reviewing sales reports can be tedious, they are vital when it comes to forecasting future sales and placing the correct orders. Not only this, but they’ll also help you to clearly identify customer spending trends: if a product is consistently declining in popularity, reports should help you to pinpoint this before it is too late. By regularly reviewing your reports in more detail, you put yourself and your company in a better position to maintain healthy cash flow. The Kini Group offer some great tips for improving your sales reporting processes.
- Look to Reduce Your Spending in Other Areas
Whilst most business’ drive a large proportion of their finances into the development and promotion of their products, there are of course other business expenditures, some of which you could probably cut back on. For example, you could:
- Consider ditching your business’ landline in exchange for your mobile phone: traditional telephone lines are now often much more expensive.
- Switch energy suppliers to see if you can achieve a better rate. You could even add energy saving light bulbs to your office or shop space.
- Reduce your printing costs by going paperless: transition to digital invoices and store important documents on a memory stick or in an online storage space, rather than printing them out to file physically.
Consider Getting an Immediate Cash Advance
A merchant cash advance is a quick and affordable way to solve short-term cash flow problems. If you haven’t heard of it already, your business can receive an instant influx of cash which is then repaid simply using a small percentage of your future customer credit card and debit card sales.
Better still, with an immediate cash advance you can access unsecured working capital within just 24 hours of applying. This is of course a much speedier option than applying for a traditional bank loan. So, if you’re in a hurry to resolve cash flow issues this could be the perfect solution.
- Repayments are always in sync with your cash flow. If you earn slightly less one month, the amount you repay is also suitably smaller.
- There is no interest charged. Instead, when you apply for an advance, the lender agrees upfront just one, all-inclusive fee.
- Whilst other loans can impose restrictions as to how the funding is spent, with an advance this is not the case; you are free to spend the money however your business sees fit.
- Renegotiate Contracts with Suppliers
If your business is continually low on funds, then it is perhaps a good idea to re-evaluate contracts with suppliers. You may find that you are considerably overpaying for your products.
If your supplier is unwilling to negotiate costs, then consider changing supplier. Do not be afraid to shop around, but also consider any impact a change in supplier could have on the quality of your product.
Encourage Your Customers to Make Early Payments
If you’re frequently left waiting on late payments to clear for your products or services, then of course you are going to experience cash flow problems. There are a few different ways in which you can encourage your customers to make payments sooner, including accepting online payments or signing your clients up to an auto-billing cycle, if appropriate. You should also not be afraid to ask customers for payment upfront. Profit improvement expert, Mark Wickersham, even suggests that customers want to pay you in advance.
Look To Improve Your Business’ Invoicing Process
If you still create and send out invoices manually, you should consider automating them instead, if it is appropriate of course.
Manually dealing with invoices is a much slower and more erroneous process. By automating your invoices, you remove the necessity to invoice multiple times, which in turn frees up time for you to be do something much more profitable. In essence, updating the process could save your business a lot of time and money.
Consider Hiring an Accountant
Instead of viewing an accountant as an expense, you should view them as an
investment. If your time is already stretched, having an expert that you can appoint
to review your business’ finances could be a huge help.
The financial expertise of an accountant should afford you the appropriate guidance to rectify cash flow problems in a way which is most suitable to your business’ individual needs. You don’t even need to hire them on a full-time basis, just a few hours a week could bring big benefits.
Downsize or Relocate
Unfortunately many businesses make the mistake of renting premises that they simply cannot afford. If your business space is larger than what you need, consider downsizing to a smaller, and thus cheaper space. Another option to achieve cheaper rent is to relocate to a new business space outside of the city centre, or in a different, more affordable part of the city.
Switch to a High-Interest Savings Account
If the account in which your savings are currently kept has a particularly low-interest rate, you should of course look to swap to a different account where your pounds are put to better use.
Consider Offering Discounts
During quieter periods of the year when sales tend to be slow, you could consider offering discounts to incentivize customers and increase sales. Often, discounts do not need to be monumental in order to capture customer attention.
There a multiple ways in which you can improve your businesses’ cash flow. Simultaneously reducing your expenditure whilst increasing your revenue is key. However, some solutions are of course much quicker than others. Whilst encouraging upfront payment and reducing the cost of rent will undoubtedly make a significant difference over time, if it is fast-track solution you are after, nothing will increase your funds quicker than an immediate cash advance will.