5 Tips to Improve Cash Flow for Small Businesses
As a small business owner, you know that cash flow is key. If you’re not taking care of your cash flow, you’re losing money in ways you may not even realise. We’ve pulled together 5 tips to improve your cash flow and we’ll discuss what good cash flow looks like.
What Does Good Cash Flow Look Like?
A business with healthy and stable cash flow is able to meet bills throughout the month, has good credit options, and is able to support growth without running into financial walls.
To achieve a good cash flow, you have to have a clear understanding of where your money is coming from and where it’s going. You should track your expenses and income so that you can see where you can cut costs and increase revenue. This will help you make better decisions about how to allocate your resources.
5 Tips to Improve your Cash Flow
If your cash flow isn’t where you want it to be, start by doing the following, five simple tips.
- Keep a budget – Review it weekly until you are where you need to be and then move to bi-weekly or monthly depending on your business. It’s essential that you know where your money is coming and going. This will help you make better choices for your business and keep you from overspending.
- Search for better prices on inventory and supplies – If you have too much inventory, it ties up your cash flow, too little can lead to stock-outs, which can cost you sales. “Just in Time” is struggling to work post-Covid and if you don’t have enough inventory, you may miss out on opportunities to make a sale. It’s important to strike a balance and manage your inventory carefully to ensure that you have enough to meet customer demand without tying up too much of your cash flow.
- Take care of your accounts receivable and consider outsourced credit control if you struggle here – Your accounts receivable is the money that your customers owe you for goods or services that you have provided. Managing your accounts receivable is crucial to maintaining a healthy cash flow. This means sending invoices as soon as the work is completed and following up on outstanding payments.
- Check your resource profile – Is everyone equally busy? Could the work be spread amongst more people or indeed fewer? The quicker it gets done the better and, you may find you’re paying for resources you don’t need. Start by tracking time and expenses and see if what you are billing matches the effort your business is expending to complete the work.
- Set quarterly objectives, work on them every day and stick to them. Review monthly. Having a plan and working towards it daily will help to ensure that your cash flow remains healthy.
If you’re not taking care of your cash flow, you’re losing money. Cash flow is the lifeblood of any small business
Invoice Financing to Even Out Your Cash Flow
If you find yourself with an inconsistent cash flow, invoice financing can be a great way to even things out. Invoice finance is a funding facility that allows businesses to borrow money against the value of unpaid invoices. This can be a great option if you’re waiting on payments from customers and need help meeting your short-term financial obligations.
Invoice finance isn’t just for companies who are struggling one of the many positives of engaging with invoice finance is the positive impact it has on cash flow and the knock-on effects of a well-balanced cash flow, enabling frictionless growth. Contact us for more information.