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Tips to Improve Cash Flow for Business Owners

Tips for Improving Cash Flow

Cash flow is one of the biggest sources of stress for business owners. While cash management is essential to a healthy business, it is only one of the aspects business owners need to address to have a healthy and profitable business. From getting a loan to collecting aging accounts receivable, there are many ways to improve cash flow.  Here are a few that any business can incorporate, even when they’re flush with cash. Need to hire? Add inventory? Move? Cash is king. Healthy cash flow will put you in the driver’s seat to make strategic moves, and be a stronger negotiator. Best of all, more cash reduces stress.

Let’s examine some easy-to-implement strategies for improving cash flow:

Stay on top of what you are owed

  • Can you invoice sooner to better match the timing of work performed?
  • What about the invoice cadence?  Consider invoicing semi–monthly versus monthly.
  • Make it hurt for them to pay you late.  It hurts you, be clear about penalties for late payments.
  • On large projects, ask for a deposit for materials.
  • Require payment in full before you release the final product.
  • Be precise with billing.  If you’re not keeping track, you may be missing out on the money you are owed.
  • Set up ACH, and take the thought out of bill pay by having your customers on an autopay option (incentivize this!)

Put off paying others until the last minute

  • Who needs to be paid first and why? Be sure you’re paying the accounts with penalties first and putting off more lenient ones until your cash flow recovers.
  • Ask for an early pay discount wherever you can.
  • Use online bill pay to pay at the 11th hour.

Use debt to your advantage

  • Refinance old debt.
  • Look at alternative lending options.  Consider factoring, or accounts receivable loans.
  • Pay as many vendors on a credit card as possible. Bonus: You’ll get an extra month to pay and points for flights!

Look at expenses and prices

  • It may be time to increase pricing.  Have your costs gone up? When was the last time you increased prices? 
  • Ask vendors what you can do for a discount. Recurring payments? ACH? a longer contract? You’ve gotta give to get.
  • Partner with others in your industry. Volume purchases or referring companies can get you favorable discounts.

Get the whole company on board

  • From the assistant to the CFO, get the whole team on board with a rolling 12-month cash flow forecast. Many small businesses fail due to a lack of planning and control over cash resources.  Having a more detailed 13-week cash flow plan can give you a heads up before you’re really strapped for cash. 
  • Segment suppliers, customers, and inventory. Don’t try to tackle your cash flow as a whole. Do you have too much cash tied up in products that sell seasonally?
  • Enlist the help of an experienced CFO to set you up for success so you can have more time to focus on running your business. Enlisting an outside expert will generate much more cash than it will cost.
  • Ask everyone for ideas on where you can cut back.  You may be spending on software that everyone hates or a retreat no one wants to go on.  Ask and listen.