8 Ways to Improve Your Cash Flow
One of the most critical components to a business is cash flow because it’s what helps you cover costs and invest in inventory/equipment and hire new employees. There are times when a business has more cash going out than coming in. There’s a variety of things that could cause this. Unfortunately, cash flow issues is one of the main reasons a business might close, so it’s best to find ways to increase your income.
Determine Your Finances
The very first thing you must do is take an up-close look at your finances. Figure out what you have coming in, what you have going out, and why there’s a difference. After that, you can begin to take steps to fix the issues.
One of the best ways to fix a negative situation with your cash flow is to look at what you’re spending and see where costs can be cut.
Reduce bills by determining what’s truly necessary. Find some ways that you can trim your costs on expenses, utilities, and goods. Even $3/day can make a major difference in the big picture.
Have your customers pay you earlier by offering incentives for paying early and penalties for paying late. Consider making it easier for customers to pay by diversifying the payment methods you accept. Additionally, you might want to automate your invoice process and send out reminders when payments are due.
Get better deals on supplies/services. Typically, a business requires both labor and materials to run. This is a great place to start looking for better deals and potentially trim costs.
Take time to balance out the timing on your receivables and payables. Look over the calendar and make sure the two line up.
Change your payment schedule. While it may be helpful to your credit score and your vendor relations to pay early, if it’s an issue try paying closer to the due date. Or contact vendors and see if you can renegotiate your schedule.
Consider short-term business funding if you have a longer period where cash flow is an issue.
It takes more than simply making more money to fix a negative cash flow. Here are a couple more options for you:
Evaluate your market value and consider raising prices if necessary. Be careful though, you don’t want to price yourself out of the market.
Consider diversifying what you offer and grow into new markets. This equals new customers, which equals increased cash flow.
When running a business, keep in mind that you’re going to have highs and lows. You just need to make sure that you’re keeping an eye on your finances. If you need help, contact Summit Commercial Capital for more information on fixing your cash flow issues.