Managing cash flow in a business can be difficult, especially during unprecedented times such as these. Struggling companies and growing companies alike can be hit with cash flow problems if their finance, operations and/or investing activities are not running efficiently.
Here are 5 strategies that you can implement in your business to help improve your cash flow.
1. Lease instead of buying
Whilst leasing supplies and equipment is usually more expensive than buying, it may seem counterintuitive if you are only looking at the bottom line. However, unless your business is flush with cash, you are likely going to want to maintain a cash stream for day-to-day operations.
By leasing, you pay in small increments, which helps to improve cash flow.
2. Offer discounts for early payment
Most businesses can be incentivised to pay ahead of time if they are offered a discount for doing so. This creates a win/win situation for both of you, as they benefit from paying less and you benefit by getting the cash in earlier.
3. Send out invoices immediately
Businesses that send out their invoices as soon as the work is done are generally paid more quickly too. It is also important to ensure that your invoice is easy to read and understand, and the terms are clearly stated.
4. Conduct customer credit checks
If a new customer is wanting payment terms instead of cash, be sure to conduct a credit check before you sign them up. If the client has a poor credit rating, you can safely assume that you will not be receiving payments on time.
5. Pay suppliers less
If you maintain friendly, regular communication with suppliers, you will have a better chance of getting better payment terms from them. Offer suppliers early payments if they are willing to give you a discount in return. Learning to master the art of negotiation is an essential part of doing business and could help you get a better deal from your suppliers.