Strong cash flow is an essential element for business. By improving your cash flow, you can plan and budget your business’ future growth. It also helps you handle your daily and monthly business responsibilities and spending. Here are six ways that can help you increase your business cash flow.
- Forecast your business cash flow
Plan and forecasting your cash flow helps you minimize uncertainty and predict your balance sheet. It gives you clear sight of your cash flow cycle on a monthly and yearly basis.
You can forecast your cash flow simply by total up all incoming payments, revenue, or receivable, minus the sum of outgoing expenditure and spending on a monthly and yearly basis. Now, you can have a glance at how much you have left during the forecasted time frame.
Having this information at hand means that you can preplan for any big spending, such as bulk purchases and investments or a long-term commitment to hiring and marketing campaigns, while making sure that your cash flow is not affected.
- Set up a Payment Policy
Most businesses find their cash flow to be stuck because they offer long credit terms to their clients, some events can go up to 120 days. Try to keep your credit terms short and collect payment as soon as you can by offering a discount on early payment or charging interest for those who pay late.
Alternate financing like LendingStar, provides an invoice financing marketplace for the business owner. You sell your invoice with a small discount and receive instant cash for your business’ daily operations. In other words, you convert your short-term debt to liquid cash.
- Request for credit term
Yes, request credit terms from your client – you read it correctly. Although “one should not impose on others what he himself does not desire”, credit terms help businesses ease their cash flow by a selling-first-and paying-later method.
- Manage Inventory
Regularly reviewing your inventory will reveal the costs and benefits of holding various stock items. Balance your inventory by not having too much or too little stock, as this can cause cash flow deficits or lost sales opportunities.
Plan and purchase the right amounts and types of stock to ensure you achieve sales, new customers, and strong cash flow.
- Reduce Overheads
Minimize your ongoing monthly payments, such as company car instalment or office equipment maintenance.
Consider renting company vehicles and machinery instead of buying them. By doing this, you can avoid having your cash tied up in depreciating assets. Also, check if you are getting the best deals on insurance, phone and technology services, and other regular expenses. Lowering staff overtime and creating a more environmentally friendly workplace can cut down on power and water bills and reduce overheads.
These changes can increase your monthly cash flow significantly, giving you more money to invest in company assets, such as new processes and staff training.
- Have a Backup Plan
When all the above fail, make sure you have sufficient credit limits with the bank in case of emergencies. This can help to fill your cash flow when unforeseen circumstances happen. Make sure that you check the approval rate before you apply. Be mindful that you will need to pay back the loan amount with expensive interest to the bank: so, only consider this option if you are confident that the business will pick up again in the near future.
Invoice financing marketplace allows small business owners to instantly trade on their receivables and invoices for instant cash flow. Subscribe to our newsletter for more business- and financing-related blog post updates. Business owners or investors can register here for free.
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