12 Ways to Boost Cash Flow
May 8 2017
As we all know, cash flow is the lifeblood of every business. One study found that half of all business owners have cash flow issues. A healthy cash flow strikes a balance between increasing the cash coming into the business while slowing down the money going out of the business. Here are twelve ways to boost your business's cash flow.
Shorten the timing on receivables
Send invoices immediately after delivering goods or services. Shorten payment terms. Offer small percentage discount to customers who pay early. Charge a late fee to those who pay late. Monitor your receivables weekly. It may seem like overkill, but if you're having cash flow issues, that hour you spend every week could work in your favor. If it fits your business model, charge half now and half on delivery. Offer credit to established and worthy clients only. [there's another blog post here]
Use a business credit card
Using a business card to pay suppliers or make purchases can buy you time -- as much as 21 days. If your card offers cash back, that's even better. However, be careful that you pay it off every month, so you don't carry too much debt.
Encourage your customers to pay with debit or credit cards
Receiving checks, taking them to the bank, and waiting for them to clear can take up to two weeks. Some accounting software like Quickbooks or apps like Square makes taking card payments easy and hassle-free. Yes, they charge a fee, but the fact that you get the cash sooner helps cash flow and the fees are a business expense according to the IRS.
Make an appointment with your CPA
Having a CPA in your corner is an investment, not an expense. Your CPA or accountant can help you analyze your cash flow, spot leaks, and help you find ways to fix them. They can also help you navigate the ebbs and flows of your business. If they offer outsourced CFO services, consider it for your business. It may be time to pass off your financial management hat to a professional.
Review your pricing
Pricing is that delicate balance between boosting cash flow and not losing customers, and it's tricky: price too low and people perceive your product is inferior, price too high and you risk your customers moving to a competitor. Do some market research and see how your fees/prices compare with your competition and then revise as needed.
Re-negotiate long-term contracts
If you have a good relationship with your suppliers, you may be able to negotiate a better deal on your contracts.
Move from desktop software to SaaS
Despite popular belief, SaaS (software as a service) programs can be less expensive than desktop versions over time. While you pay a monthly fee for the service, desktop versions cost more upfront and often have hidden charges. SaaS programs also allow you to budget more accurately.
Cut the fat
Comb through expenses and slash all the overhead you can. Look at unnecessary subscriptions, including ones you've forgotten you had. Investigate cheaper options for all of your expenses. Be brutally honest; every cost you can cut brings you closer to running a lean business.
Invoice Factoring/Financing
If you need a large amount of cash quickly, invoicing factoring or invoice financing may be your best option. You can read more about it in our blog post here.
Open a high-interest savings account
Make your cash work for you in a high-interest savings account. You'll earn an excellent rate of return on the cash you have on hand, and it's accessible to you whenever you need it.
Tighten inventory/Evaluate services and products
If you carry an inventory, do you have items that aren't moving? Consider a fire sale to free up cash. Take a hard look at your services and products and decide if now is the right time to launch something new.
If you need a thorough cash flow analysis, contact us for a consultation. We help owners understand how they can eliminate the leaks and build a lean and succesful business.
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