Cash flow issues plague many small business owners, especially in summer when business may slow down. Fortunately, there are steps you can take to keep your cash flowing smoothly. Here are nine tips for boosting your business’s cash flow so you don’t fall short on funds.
Keep track of your cash flow
The first step to improving your cash flow is staying on top of it. Using an accounting program, such as QuickBooks or FreshBooks, makes it easy to monitor your cash flow on a weekly basis so you can see when your accounts receivable falls short or your payables climb too high.
Take a closer look at your accounts payable
Are there ways you can trim your expenses? Often, small business owners sign up for products, subscriptions, or services they never use and ultimately forget about—but keep paying for. Review your expenses every six months to trim the fat.
Talk to your vendors
Are your cash flow crunches seasonal? If there are certain times of the year you regularly run short on cash, ask your vendors if they can offer more favorable payment terms, such as net 60 instead of net 30, to help you get over the hump.
A tool like InvoiceASAP makes it easy to invoice for projects or products upon completion or delivery. Unless customers specifically want to be billed once a month, invoice as soon as the job is finished. This helps you get paid faster and eliminates any risk of forgetting to invoice (yes, this has happened to me).
Adjust your payment system
You can also improve cash flow by having customers pay you an initial deposit for a job or order upfront and then the rest upon completion. Or, divide the project or order into stages, with partial payment due at each stage. This is especially useful if you frequently work on long-term projects that take months to finish or require a substantial investment in materials or supplies.
Motivate your customers
Offering discounts for early or cash payments can motivate customers to pay faster. Conversely, imposing late payment penalties is also an effective motivator. Just the fear of getting charged a fee can light a fire under your customers.
Renegotiate or consolidate business debt
Talk to your lenders. In some cases, it may be possible to get more favorable credit terms, such as lower interest rates or extended payment terms, which can help boost your cash flow.
Sell excess business equipment
Selling used business equipment you no longer need can help you generate additional cash. Both Amazon and eBay are good places to sell this type of equipment.
Get rid of excess inventory
Eliminate the cost of storing excess inventory by holding a clearance sale or, if the items still don’t sell, contacting a liquidator. Getting something for unsold inventory is better than nothing.