If you are the owner of a small business or are self-employed yourself, then you will know just how important staying on top of your cash flow is. But even having said that, there will be many business owners or entrepreneurs that do struggle with cash flow. Even if business is booming, cash flow can still be a problem from time to time, depending on what is going on and what payments you need to make. Plus, if what you are doing isn’t running efficiently, then before you know it, there could be some issues going forward.
For example, if your debts or what you owe other people or colleagues, are due to be paid right before you get in the money from sales that you are expecting, you will face cash flow problems; simple as that. That could then lead to not being able to pay business bills or even take a wage if that is what you do. Meaning a knock-on effect for your whole life possibly. And that can quickly spiral and lead to larger problems later down the line. So staying on top of cash flow really is important for small business owners. So with all of that in mind, here are some strategies to help you do just that. Some may not be super relevant to your business, but you can adapt things as you need to.
Offer Discounts for Early Payment
It is hard to think of many people that wouldn’t appreciate an incentive to get some money off something. So to help people pay as quickly as possible, you could offer a discount on the invoice, for example. This then encourages people to pay early, which helps you to plan your cash flow, and then you can go from there; a win-win for both you and the client paying the bill.
On a similar note to the point above, it is really important to make sure that you invoice as soon as work has been completed. It is fresh in people’s minds, and will make a difference to how soon you are likely to be paid. Some companies will have set dates that invoices need to be in, in order to be paid by a certain time. And if you miss that time, then it could mean a delay to payment. Sending out invoices early can also be a good way to make sure that you don’t forget about it too.
Keep a Close Eye on Payroll
If you have employees, then wages will be one of your biggest expenditures. So making sure that you aren’t paying too much for the work that they do is really important. It can be a good idea to have a clear policy about working hours in the first place, so they know what they get paid for and what they don’t get paid for (such as sickness, for example). But looking to get things like a small business time clock so your team can clock in and out of work, can allow you to see if people are leaving early, for example. Then you can pay less if they have done so (depending on the contract that they have). If you can save some money here and there with wages, then it can make a difference to your cash flow.
Rethink Your Business Bank Account
You are going to have a bank account for your business, but if it is just a savings checking account, then it is going to have an impact on how much your money can do for you while it is in the bank. But if you are able to put some of your business earnings into a high-interest savings account, then it can be a simple way to make your money do more for you, without you have to do a whole lot other than switch accounts. So take a look at what your current bank account is offering, and then you can go from there. It will be a small difference, but can help with cash flow, especially if you are already earning a good amount.
Make Deals with Suppliers
If you regularly use the same supplier, then looking to maintain a friendly relationship with them can be really key. If you work with them a lot, then it can serve you both well to be doing so at a good price. For you, it helps your cash flow and impacts your profit. And for a supplier, they will get more regular work from you. You could ask for discounts for paying early, as well as talking about the option of a long-term discount because of your regular custom.
Check Competitor Pricing
It can be a simple solution to just think that you should charge more for what you do, in order to improve cash flow. But just increasing prices can seem quite daunting, at least at first. So instead, to make a price increase justified in your head, do some research on competitors. What are they charging for what you do? It is also a good idea to negotiate prices on request, as some clients are able to pay more. So unless you have a product that needs to be a set price, going to give quotes for work, rather than set prices, can be a way to help cash flow as you can charge more for some things.
The Bottom Line
Having a steady cash flow is when the business is doing well, but also when you’re organised and have the operations behind the scenes running smoothly and efficiently. So to reduce the stress of wondering how you will pay for things, think about these steps above and how they could be implemented in your business. You should also make sure that you are regularly reviewing your budget to see what you can afford, whether for staff or inventory, as overspending can be easy. Small changes can make a big difference for your business, and for your cash flow.
*This is a contributed post