Not Sure How to Improve Cash Flow?
There are myriad challenges associated with owning a small business. Even for the more than half that are home-based, there is sill plenty to consider, not the least of which is how to improve cash flow. Improving cash flow is about creating stasis between dozens of facets including accounts receivable, credit extension, and inventory management. Sometimes, business cash flow loans are absolutely necessary. In fact, about 63% of businesses have taken out business loans for cash flow purposes. Still, these loans can be difficult to obtain. About 15% of small businesses surveyed in the U.S. report difficulty obtaining credit and loans. Here, we’ll look at a few suggestions for how to improve cash flow before you turn to cash flow loans.
- Get your billing schedule organized. Use an accounting software program to help you bill early and often. Software that classifies the age of accounts receivable will help you act immediately on overdue accounts and increase your chances of quicker receivables turnover.
- Stretch out your payables. If you use the maximum time possible to pay your suppliers, you’ll have plenty of opportunity to collect on receivables without spending on short term credit.
- Use early payment incentives. If you can get a discount for paying early, do your best to take advantage of it. That means a little extra money in your pocket. It might also be wise to offer such a program to your clients.
- Build longer term relationships. Instead of working on a project-by-project basis with all of your clients, try to convert some of those relationships into retainer relationships. Even if there is a discount involved, you’ll have more predictable cash flow.
- Pay attention to pricing. The number one “how to improve cash flow” rule most people forget is one of the simplest. Make sure your prices are keeping pace with costs. Check out your competition and be aware of what your profit margin really is.
- Stop overstocking. Regularly gauge your inventory turns to make sure they’re reasonable. Try not to buy more than you need, even if there are big discounts available.
- Think about leasing. Equipment loans might cost more than outright buying in the long run, but it will help you avoid tying up credit lines or cash you need for day-to-day operations.
Before you apply for a loan, try these solutions for improving cash flow. They just might be the necessary push in the right direction you need to get your business back on track. For more, read this link.