4 Effective Cash Flow Management Strategies For Small Businesses
While sales are the muscles of a business, cash flow is its lifeblood. Cash flowing regularly into a company is necessary to pay salaries, buy materials, and literally keep the lights on and the doors open. Many businesses are forced to slow their growth simply because they lack the cash inflows necessary to support the cost outflows.
The occasional cash flow issue hits every business. But if you find that every month you’re coming up against the same problem, it’s time to rethink how you handle the cash flow. These tips should help you right the financial ship:
Start forecasting your inflows and outflows
The first step is to get a better handle on when your cash is entering and leaving your business bank account. If you’ve been flying blind and paying bills or invoices as they come, you won’t have a sense of what’s causing your cash flow snags.
A cash flow forecast or projection is an estimate of the money you expect to flow in and out of your business, and when. You’ll include your fixed monthly costs (such as rent and utilities, and your repayment schedule for a business loan), as well as expected expenses like replacing an ageing printer or repairing old desktop. You’ll also include your expected revenue for the same time-frame.
To forecast your cash flow, consider investing in accounting software that can help you stay on top of your finances.
Expand payment options for customers
When you examine how to improve cash flow in small business, you may want to focus on speeding up the process for customers to pay you.
For one thing, you could offer more payment options by accepting credit cards and debit cards Consider as well digital wallet or mobile payment solutions such as PhonePe, Google Pay etc.
The more convenient you make it for customers to pay, the faster it might be to get the cash in your account.
Pick up the phone
An overlooked aspect of how to improve cash flow in small business is the human touch. If you’ve tried to send email reminders or automated electronic reminders to customers whose invoices are past due without much success, consider picking up the phone.
Email can be distancing, but hearing your voice can add a personal touch. It can remind customers that the business that has provided them with the services or goods has a human face.
Sell or lease idle equipment
When cash is tight, everything should be on the table. This is especially true of idle equipment that can be sold for cash or leased to another company that can put it to use. Even if the company is using the equipment, it should consider that the same equipment could be rented for much less, while the proceeds from the sale can be used to fund the business in the interim. This especially makes sense for long-lived equipment that is easy to move, transport or install. If you have a storage center with equipment, you’ll also be saving on storage costs.
Financial flexibility is important to every business, particularly when the future economic environment is unclear. Employing the recommended cash flow strategies above can build up your bank balances, extend the number of strategic options available to you as a business, and reduce the likelihood that you will be forced to take unpalatable or distressing actions.
