Cash flow is the movement of cash and cash equivalents into and out of a business. The ability to generate a positive cash flow is vital to the survival and prosperity of a business. Here are some tips to help boost your business cash flow:
Monitor Your Cash Flow
Keeping up to date records of the cash coming in and going out of your business can help you manage cash flow and see where and when cash is required. A good way to do this is to avail of one of the many accounting software packages available. It will also allow you to generate different types of reports to show how your business is performing and allow you to plan accordingly for quiet periods during the year.
Before buying any new assets, consider whether it is actually needed or if there are any cheaper alternatives. Furthermore, if you have any assets that are no longer in use, consider selling them to help generate some cash. Another option may be to lease equipment instead of buying it which will allow you to get the latest technology but without tying up a significant portion of cash in one purchase.
If you have available funds to purchase fixed assets outright, you need to consider cash flow over the coming months and if that would be the best use of the cash. Could you put the cash towards growing your business and in turn generating more profits? That might mean you may need to borrow the money for the fixed asset but in the long run you could still be better off.
Customer and Supplier Payments
If you are struggling with customers paying on time, try offering incentives, such as discount for early payments but making sure the loss for any early payment is worth receiving it in the long run. Consider asking for a deposit upfront, this allows you to generate cash to help pay for any expenses incurred such as buying materials.
In regards to your suppliers, unless there is a worthwhile reason to pay early, use the available credit terms but ensure not to incur late fees or interest and harming your relationship. This allows you to keep the cash in your own bank account should you need it in the interim.
Cutting costs can really help improve your cash flow. By keeping track of your expenses, you can see where you can save. This will allow you to see if there are any expenses that are unnecessary or could be reduced. This may include subscriptions that are no longer relevant or reducing the level of stock you keep and thus improve the amount of cash on hand.
If you or your business is experiencing cash flow problems, you should seek help sooner rather than later to help you regain control.