Proper management of your business’s cash flow is vital to your success. Having a strong cash flow means that you can pay staff and creditors and invest in your growth, while a weak one means that, sooner or later, cash flow problems could cause some serious complications when it comes to doing business. Thankfully, there are plenty of tried and tested ways that you can ensure that your cash flow remains healthy. Read on to find out our top 8 ways to improve cash flow for your business.
Chart A Cash Flow Forecast
A clear cash flow forecast should be your priority. Having insight into complications that you will encounter in future gives you time to plan and prepare to circumvent them. With this in mind, meticulously track your income and expenditure, and keep updating your information to reflect your current position. Doing so will pay dividends in having clear visibility on the immediate future of your finances.
Send Invoices Punctually And Always Follow Up
One of the most crucial parts of cash flow management is to make sure your invoices are being paid, and promptly. Send invoices out as soon as your service or product has been delivered to the customer, or even better, make use of software that can generate and send these invoices automatically. Make sure you’re sending polite reminders as well. These follow-ups should help you quickly reduce the amount of unpaid invoices you have.
Tighten Your Payment Due Dates
Generous payment dates can leave your cash flow in a vulnerable state where you don’t have a clear prediction for when money is going to be coming into the business. They also make it easier for a customer to forget about them over time. Shore this up with tighter payment dates. Bring them down to 14 days rather than 60. For larger payments, put together a clear payment schedule for your customer.
Improve Your Inventory Management
A poorly managed inventory represents cash being wasted, which is why one of the most vital ways to improve cash flow in the business is to get a tight grip on this. Excess stock needs to be cleared to release the cash they represent back into the business, and sales and other promotions can be very useful for this. Understanding your sales patterns will help you to prevent overstocking items and waste less money in the long term.
Strategic Financing Is Vital
Make use of the tools available to you. Overdrafts, invoice financing and short-term loans can all help you to inject life back into a struggling business. Just make sure you’re doing so responsibly. If these become a crutch for you to lean on, they could instead make your financial issues worse. If you end up in a dire situation, then consider making use of a professional company rescue service.
Build Up A Cash Reserve
Good cash flow management involves building up a reserve fund to act as a financial safety net for your business. This reserve can help you push through quiet periods or unexpected costs without harming your income, so it’s a great idea to have this prepared for when you need it. Start setting aside a small percentage of your income each month to get this going as soon as you can.
Conduct A Thorough Review Of Your Expenses
One of the best ways to improve cash flow is to make sure you’ve got a complete understanding of your money and where it’s going. Armed with that information, you can make the best decisions for your business to keep your cash flow strong and healthy.
Offer Incentives For Early Payment
You can encourage your customers to pay invoices promptly by offering small incentives for early payments. Small discounts or other promotions can help you get money into the business much quicker.
We hope that you’ve learned a bit about how to improve cash flow and can start putting some of these tips into practice. Having a variety of ways to improve cash flow for your business at your disposal will help you to ensure its health, but if you need outside help, then give us a call. Ballards Business Recovery are highly experienced in company rescue, and we can help you to get a struggling business back on track.
