For all your online business building info! , 2020-10-01 02:33:16
7 ways to improve your small business cash flow
One of the challenges of running a small business is dealing with the flow of cash into and out of the business. Below you’ll find seven ideas for improving your small business’s cash flow.
1. Bill on time
Every small business owner should recognize the following situation: you’re very busy with the day to business building and trying to make the deadlines that you don’t get around to billing on a regular basis. I bet you can relate to this situation and you’re not alone. Many small business owners do the job first – because they don’t want to loose a client – and think about the billing second. Don’t wait until the last moment and bill the clients on time! Try to come up with a system that works for you or hire someone that handles the billing for projects on a regular basis. Especially with long-term projects you should try to negotiate in advance for regular payments instead of waiting for payment until completion of a contract.
2. Come up with incentives for faster payments
Offer your clients an incentive for quick payments. For instance your small business can cut the time spend waiting for payment if you for example offer a discount of 1% or 2% for payment in 7 days. Most clients will make use of this discount and make the payment sooner to get this little discount. It’s not only good for the client’s wallet, but also good for your business’s cash flow. Try to come up with some incentives of your own (and please leave a comment below if you can think of a good one.)
3. Barter instead of cash
If you have a cash shortage you could try to barter goods or services of your own in return for goods or services that your small business needs from someone else. You have to remember you’re still required to report the value of the barter transaction on your tax return.
4. Avoid slow paying customers
One of the best ways to avoid cash flow problems in your business is by avoiding and weeding out to slow paying businesses and client in an early stage. Ask for – and try to check out – their credit references, especially if someone is becoming a significant client or customer. For instance you could try to find other businesses that have or had a relationship with this client and ask them if the client is paying on time. (You not always get an answer, but asking is free, so always try it!) Don’t get into business with slow paying customers, even if it is a large project. You’ll probably end up chasing after the client to paying their bills, it will probably cost you a lot of time. Remember time is money, so don’t waste your time on slow paying customers.
5. Low inventory
Having a large inventory is money spend that could be used elsewhere and it is not producing any interest or saving for your small business. Sometimes reducing inventory can be pretty simple. For instance you could try to find a wholesaler that can deliver within 12 to 24 hours. If you can anticipate the projects needs on time, you can just order them on time when you need it. Another way is to reduce the number of brands on stock of the same item. A quick win!
6. Give gifts instead meals
Many business owners like to thank the client after a project is done, for instance with a dinner or lunch. In some countries it is allowed to write off half the cost of this meal. Instead of “loosing” half of the money you can also give the client a gift or a gift certificate. In most cases you can write off the entire cost (depending on your countries tax laws.)
7. Consider consolidating loans
We know that it’s often tough for any small business to borrow money (especially in these times.) But this doesn’t mean that many small businesses have already many different loans, especially those businesses that have been a long time around. For instance: they have car loans, equipment loans, business line of credit and business credit cards. If your business has many different kinds of loans you may be able to consolidate it into two or more loans into a lower-interest account and improve your cash flow. Talk things through with a CPA before you talk with the banker. They can give you valuable advice for your specific situation.
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