Well-managed cash flow is the secret to the success of every business. More than anything else, entrepreneurs should always stay on top of their cash flow to get a sense of how much is coming in or out of their company.
Weekly, if not monthly assessments are important since it’s the only way to track if your business is doing well or not. If you see that your cash flow is in the red, it might be better if you apply for alternative business financing such as a business term loan.
Cash flow management remains to be one of the tasks that most business owners find extremely challenging. Because of this, most do not know how to improve their cash flow and balance their company’s cash position. While cash flow strategies do not come in a one-size-fits-all fashion, a combination of different techniques can be employed by companies that will ensure efficiency is maintained.
Here are some strategies and techniques you can immediately put into practice which will help boost your business cash flow.
1. Encourage Your Clients to Pay Earlier or On Time
No matter how much we want to be paid, the instant your customer receives the products or services, that just doesn’t happen very often nowadays. Some clients can take up to 30 to 90 days to pay and some, even longer. When you’re experiencing cash flow issues, this type of arrangement can strain your resources.
Encouraging your clients to pay earlier or on time is a strategy that helps you manage your cash flow the way it needs to be. However, some business owners find this a challenging task to undertake for a variety of reasons. This is why it’s recommended entrepreneurs offer their clients incentives such as discounts, as a reward for paying earlier than the due date.
This is a proven tactic that can be very effective in motivating your clients to pay their invoices in a timely fashion.
2. Do Something About Slow Inventory Turnovers
Proper inventory management and cash flow management go hand in hand. Having too much inventory when your product inventory turnover is slow can pose a major risk to the stability of your cash flow.
This is why it’s important you dispose of your inventory as soon as it arrives, otherwise, you’ll be stuck with an obsolete product that will not sell.
If you’re faced with too much inventory due to slow product turn over, the best way to get rid of it is to sell it at a discount. Businesses often find this a favorable solution because it significantly reduces audit times, security, and warehouse energy costs all at the same time.
With lesser money that comes out, business owners will gain better control of their cash flow and eventually improve their company’s cash position.
3. Cut Costs if Necessary
Sometimes, the best way to take control of your cash flow is to cut costs temporarily. There are a lot of ways in which you can do this. For instance, if you’re a manufacturing company, you may want to consider replacing some of your full-time workers with contractual ones. Service companies can look at spending less time on the same service.
If you can delay expenses, then do so until your cash flow becomes stable. Although this might affect your business temporarily, you can always return to your normal expense protocol once you’re in a better position, financially.
4. Apply for Small Business Loans in Advance
If you’re having trouble managing your cash flow, you’ll need additional back-up financing to keep your operation above water, sooner than later. However, banks can sense when a business needs money, yet it’s no secret they’re more likely to lend to entrepreneurs who are not in a rush.
Need and urgency to a bank seem to a single to them that you did not plan your strategies properly, leaving them with the belief that you may have difficulty paying back a loan. With this in mind, it clearly is better that you apply for small business loans before a serious need arises.
No one can accurately forecast what the future holds for your business. However, you can always prevent a cash shortage from happening.
Financial challenges are bound to happen in your business from time to time, which is why it’s a smart move to consider applying for a line of credit in advance. Doing this will allow you to easily withdraw money when you need it, saving you from the consequences and fall-out poor cash flow management ultimately brings.
Apply for Business Term Loans to Solve Your Cash Flow Issues
Cash flow is, no doubt, the most important factor when running a business. Having enough working capital is what will fuel your business and lead it to success. So, don’t let minor cash flow management mistakes hold you back or take you down.