Any brand that is highly profitable, or progressing healthily, is definitely on the right track. However, your business will encounter challenges and roadblocks along the way, despite the success. In fact, a few profitable businesses face issues with cash flow. Poor cash flow is a result of inefficiency, which is a sign that your operations are not running smoothly and that there is room for improvement.
In most cases, businesses face cash flow problems when they fail to recover receivables from clients. This simply means that your business will not have the cash to pay bills on time, which can lead to further problems. Over time, your business’ creditworthiness comes under a cloud, which is not good for your business in the long run.
That is to say, it is substantially important for businesses to implement smart strategies that cannot only keep their cash flow running positively, but also improve it. Here are a few ideas that you can consider:
Smart Ways to Keep Your Business Cash Flow Healthy
Opt for Leasing, Don’t Buy
For some businesses, this may sound bizarre because leasing equipment or supplies is sometimes more expensive than purchasing. For businesses that only focus on their bottom line, leasing seems counter-intuitive.
However, purchasing supplies is only beneficial when your business enjoys timely receipts and you have enough finances to maintain day-to-day cash streams for operations.
If this is not the case, your company may face serious cash flow problems in the future. This is when paying your due cash in the form of small increments can help you not only maintain the cash flow, but also improve it. Not only this, you can write off the lease payments because they are a business expense.
Offer Discounts on Payments
This is another option that can be tremendously advantageous when it comes to improving your cash flow. That is, everyone likes incentives, especially customers. Offering your customers discount deals, that not only grabs their attention but also urges them to pay their bills on time, can be a WIN/WIN situation for your business.
This is one of the simplest ways you can keep your cash flow running.
This one is extremely important if you deal with customers who do not like paying in cash. In situations like these, make sure you conduct credit checks, especially before they sign necessary paperwork.
It is a convenient way to determine whether a customer has sufficient credit to make the payments, or not. If he/she has poor credit, it is an indication that you will not receive timely payments. There is no doubt that your business needs sales, but it is equally important to consider that it might disrupt the cash flow of your business if your customers don’t pay on time.
So, if you decide to sell to customers who have questionable credit, make sure that you set up an interest rate that can secure your payment in the future.
Pool with Other Companies
The greater the number of buying companies, the greater the discount they will get. This may seem surprising, but a lot of companies do that to save more money. All you need to do is find some like-minded businesses that want to pool the cash to purchase supplies at lower prices.
This is a simple way to get big discounts from large firms selling equipment in bulk.
This is a necessary step if you want to keep your cash flow smooth. Taking an inventory check on purchased goods that are not selling at the same pace as your other products is essential. These products tie up a lot of cash and that is why getting rid of them instead of purchasing more makes sense.
Sell them, even if you’re not getting the price you want, to avoid disrupting your cash flow.
In case, the above strategies fail to give the desired result, consider selling invoices to a factoring company to receive immediate cash. It’s a shortcut to cash in on your receivables and to avoid being stuck with unpaid bills.
Manage Accounts Payables
It’s better to improve your terms with vendors you are working with and extend payments terms. It may vary from vendor to vendor as some offer terms of 30 days while others may offer 45 or 60 days.
Use Electronic Payments
Paying electronically will buy you more time to get your due bills clear, as it takes at least one day to process. This is a great idea to improve your business cash flow. Using a business credit card is another good way to get a grace period of at least 21 days, and that will increase the cash flow.
Offer better Deals to Suppliers
This is one of the easy tips you can use to improve cash flow. Try to maintain regular and friendly communication with your suppliers in order to land better deals. Plus, make bigger payments if they give you a discounted price in return.
This strategy often scares a number of businessmen as they fear it might lead to loss or reduced sales. However, there’s nothing wrong with experimenting with your pricing strategy as it might be helpful in finding the perfect price.
In a nutshell, if your cash flow is healthy, it is an indication that your business operation is running smoothly and efficiently. However, it is essential that you pay heed while opting for smart strategies that can keep your business cash flow healthy. Thus, the given strategies can be really helpful to maintain the cash flow of your company and help you enjoy business growth in the long run.