Authored by Phil Cohen
If your small business cash flow is starting to feel a tad rocky, it’s better to solve the problems sooner than later. Lack of working capital can put your business into a hole that’s tough to climb out from. It’s better to prevent low cash flow before it starts. Here are a few things you can do to help stabilize cash flow.
How to rejuvenate small business cash flow
1. Bill your customers right away
Since many customers don’t pay their bills until 30-60 days after receiving the invoice, your business is stuck without the cash. Sending your customers their bills right away will help shorten the time between selling and receiving payment. Early billing ensures they have plenty of time to get you the money in a timely fashion.
2. Offer incentives to your customers for early payments on bills
Giving your consumers positive motivation to pay their bills early will result in your cash flow improving as you get paid for services rendered or goods delivered faster. Offering a discount, credit, or gift certificate to those who pay their bills within an early timeframe will encourage customers to pay their bills early. It also encourages healthy business cash flow.
3. Tighten your spending and inventory
If your business is bleeding money on unnecessary expenditures, your cash flow will suffer. Regulating your inventory and avoiding the purchase of more supplies because of enticement by suppliers will also help save you money and improve your cash flow.
4. Pay bills when they’re due
As opposed to paying your bills ahead of time, using an electronic payment system will let you make payments on the day before or the last day they are due which will let you have the use of your funds for a longer period. Scheduling your payment of bills to coincide with when your customers are supposed to pay their invoices will also help.
5. Competitive pricing
Keeping your prices consistent with increasing costs will ensure you’re not paying more for producing a good than you’ll make selling it. Don’t be afraid to increase your prices if necessary out of fear of losing customers; if the economic climate is influencing prices, you need to follow the trend and increase your rates. Checking out your competition to see if they’ve upped their rates is a good way to stay on track too.
If all else fails, try invoice factoring for cash flow. Partnering with a factoring company helps ensure your business has a stable supply of cash flow to keep up with payroll and other expenses. Having enough working capital on hand gives you the cash you need to grow your business.
Learn more about the benefits of factoring for small business.