Save your business with these Cash flow strategies
Struggling for Cash flow? Are your payables due before receivables?
If yes, it means your business is suffering from cash flow problems. Even if your sales are growing and profits are increasing, you shouldn’t put the guard down. If your finance, operations and investments aren’t efficient, the business can see a downfall and can adversely affect your creditworthiness. The below strategies shall improve your cash flow.
1.Leasing over Buying
Leasing equipment, supplies, real estate etc. ends up being more expensive than buying but unless you have a great cash flow, you cannot buy them. In such cases, leasing helps as you have to pay in small increments and thereby, your cash flow is maintained well. Also lease payments are business expense so they can be written off on taxes.
2. Early payment Discount
No one wants to let go of discounts and good deals. You can lure your customers to pay their bills ahead of time. This will be a win-win situation for both the parties. This way, you can be able to maintain liquidity.
3. Check Customer’s Credit
If a customer wishes to take credit and doesn’t pay while purchase, you have to do his credit check before you seal the deal. If he has a poor credit, you can assume that your payment is at risk. Late payment will hurt your cash flow. In case, you still go ahead with the deal, make sure you set it up at a high interest rate.
4. Pool Buying
You may find likeminded companies willing to pool their cash for buying in bulk from a particular supplier. This leads the supplier to offer better deals and discount on bulk buying. You may also get credit.
5. Check Inventory
You need to regularly check your Inventory. Make a list of goods or products that are not moving or selling at the same pace as other products. They tie up cash. So you need to get rid of them even if you need to offer discount.
6. Transparent Invoice
A good invoice encourages receivables. State the terms clearly. Send out the invoice as soon as you make the sale or before the sale. Put the due Due-Date in bold at a few places including the top and bottom of the invoice. Make sure you mention the late payment charges or penalty and the interest rate clearly.
7. Electronic Payment
If you choose electronic payment, you can get time until the morning of the day a bill is due to make payment. This improves your cash flow. Some business credit cards offer a grace period as long as 21 days, which can help you a lot to increase your cash flow. You might even get cash back benefit.
8. Relationship with Suppliers
A friendly transparent relationship with supplier lands you better chance of striking a good deal with him. Early payments can lend you discount in return. The art of negotiation comes to rescue in order to maintain good business liquidity.
9. Increase Price
Increasing prices of your product may seem scary for your sales but it is ok to experiment. This may lead you to get good estimate of your product potential and customer loyalty. It leads to a better cash flow too. There’s no way to know unless you take a chance.
A healthy cash flow ensures smooth business. Right marketing, service, product decisions shall give you good liquidity. So you should regularly review and update your business plan.