12 Ways to Improve Your Cash Flow
Many businesses have problems with cash flow. The most effective way to mitigate these difficulties involves a balance of strategies aimed at improving both inflow and outflow. Here are some tips to help you accomplish this.
Target Current Customers
It is easier and less costly to sell to existing customers than new ones. Boost your cash flow by offering existing customers services or products that complement those that they have already purchased.
Create New Channels for Sales
If you are used to selling exclusively through one channel, consider expanding your sales outreach. For instance, if you have been selling in-person, open an online store, or if you have been only selling online, establish a physical location.
Analyze Your Company’s Inventory
Businesses commonly carry an excess inventory of less profitable items. Focus on marketing products and services that sell well, and reduce your stock of items that do not provide a generous profit margin.
If your company offers value to your customers, the cost of goods and services is not a significant factor in their decisions to purchase from you. For this reason, raising prices is a cost-effective method of increasing cash inflow.
Keep Track of Invoices
Slow-paying customers can have a profound negative effect on your company’s cash flow. Monitor the status of accounts receivables, and follow up on clients who are not keeping agreed-upon payment terms.
Offer Incentives for Early Payment
Consider offering a discount if your customers pay their bills early. To make it easier for them, be sure to include a link on invoices that will make it possible for them to pay by credit card.
Reduce outflow by eliminating unnecessary expenses. These may include unneeded services, unused subscriptions, and other excess costs.
Extend Payment Terms with Vendors
Longer payment terms will relieve stress on your cash flow and give you time to sell more products before you need to pay your bills. If vendors are unwilling to extend terms, request a discount for early payments.
Purchase Inventory in Bulk
Vendors often offer discounts if businesses buy supplies and materials in bulk. If your company is too small to purchase a large order alone, consider partnering with other businesses on bulk orders.
Lease Your Equipment
Leasing instead of buying allows you to obtain the vehicles and equipment you need at less cost. The leasing company also often handles maintenance and repairs, which saves you more money.
Your company cash flow will improve if you can produce more products in less time. To increase your efficiency, upgrade your equipment and invest in automated technologies.
Take Out a Loan
Obtaining a loan is an effective method of improving cash flow only if the additional funds spur business growth. Before you take on debt, be sure your company will profit as a result.
For more advice on improving cash flow, contact TCF Capital.