Tips and Tricks to Improve Your Small Business' Cash Flow
As a small business owner, you understand how crucial cash is to your business. To keep your business in good shape, it is important that you know how to improve cash flow in your small business.
With a positive cash flow, your company can manage current expenses and even respond to any changes in market demands. Conversely, when you don’t have a strong enough cash flow, operating your business can be a challenge. Even large companies can suffer significant setbacks when they suffer from cash flow problems.
Below, we list several ways to improve cash flow to ensure the viability of your business:
Tips on How to Improve Cash Flow in Small Business:
1. Keep Your Books Up-to-Date
When your accounting information is up-to-date, managing your cash flow becomes a lot less complicated. For a busy business owner, this can take up too much time and effort, but it’s an absolute must if you want to have an overview of your available cash at any given time. It can also help you in forecasting your cash flow.
There are many available accounting software that can help you keep track of the money going in and out of your business. If you don’t have the accounting know-how, you can always outsource your finance and accounting functions and discuss ways to improve your small business cash flow.
2. Reduce Expenses
Work with your accountant or your outsourced accounting staff to review and analyze fixed expenses. This way, you can determine what steps you need to take to reduce cash flow deficit and even save money in the long run.
If possible, you can strike better deals with your suppliers and vendors to get discounts. You can also consider reducing overhead costs (e.g., rent, utilities, or other related costs).
Another way you can reduce expenses is by reviewing your inventory and getting rid of items that are just sitting there. Make sure you’re not spending your resources buying more goods that cannot be moved at the same rate as your other products.
3. Keep an Eye on Your Accounts Receivables
Do you send out invoices immediately? To make sure that you’re not missing this step, consider using an automated accounting system that will help you stay on top of the billing process. This is one way you can improve cash flow management in your small business.
Don’t hesitate to go after customers who have past due accounts. If necessary, take formal action or use strong language – but stay polite and amicable.
You can also offer incentives such as discounts for customers who pay their bills ahead of time. It can be as little as 3% or 4%; as long as it won’t hit your bottom-line that much, consider implementing this in order to speed up your receivables.
*The information contained in this blog article is intended for generalized informational and educational purposes only. This does not constitute professional advice on any subject matter. This article does NOT serve as a substitute for professional advice.
This article was first posted 23 April 2019 and edited 04 January 2021.