There’s no shortage of things that can put a business in jeopardy, but there aren’t many as problematic as poor cash flow. The issue with cash flow is that it can affect businesses that appear to be in a good position, quickly putting them in a risky position that they had no idea they were approaching. A business might have made a lot of sales and have a lot of potential for growth, but if cash flow is poor, then they could quickly find themselves in an unrecoverable position.
In this post, we’ll run through a few handy tips you can use to get your cash flow into a healthier state. Even if everything is fine at the moment, taking steps now will help pad your bank account so that you can more easily weather lean periods.
Increase Your Prices
The more money you make from your customers, the more money you’ll have in the bank. Many businesses look to bring on board more customers when they want to improve their bottom line, but a more straightforward strategy can be to increase your prices. Most customers will tolerate a price increase if it’s fair, so play around to see what price is best.
Make It Easier For Your Customers to Pay
Even businesses that have made a lot of sales can fall into cash flow difficulties if they’re continually waiting for invoices to be paid. If you find that your cash reserves are running low when you’re waiting to be paid, then look at ways to encourage your customers to pay more quickly. Offering a range of payment methods can help, as can offering a small discount (5% or so) for early payment. If you’re really struggling, then you can look at invoice factoring, which will give you the money immediately (though remember you’ll lose a percentage of the money, usually around 10 – 15%).
Get Smart About Tax
It’s one thing to have cash flow difficulties because enough money isn’t coming in. It’s another to have them because you’re unnecessarily giving too much money away. By reducing your taxable income, you’ll be able to reduce the amount of money that you have to pay in taxes — and that, in turn, leaves more money in your bank account. Minimizing your taxes can be difficult if you don’t have expertise and experience, but working with a company like Safe Harbor CPAs and Tax Consultants can make things more straightforward. All the money that you save can simply be put into cash reserves, which you can dip into when working capital runs low.
Talk To Your Suppliers
Encouraging your customers to pay you more quickly is an effective way to boost your cash flow. It can also be beneficial to have more time to pay your suppliers, too. If you have a good relationship with your suppliers, then look at renegotiating payment terms. You’ll have a better grip on your cash flow if you have sixty days to pay your suppliers rather than thirty days, for example.