Cash flow is the make or break metric for any business, small or big, so you need to make sure you have strategies in place to keep that cash flowing.
1. Reduce your spending.
Decreasing your spending is one way to increase your small business cash flow.
The first step to implementing this strategy is to carefully analyse all of your business spending. How much do your office supplies and electrical bills cost every month? How much do you pay for insurance, employee salaries, and other bills?
After analysing your spending, look for areas that can be reduced. However, it’s important to approach spending cuts carefully because pay cuts can drive away employees. In addition, if you try new services to save money, the quality may not be the same.
2. Extend discounts for fast payments.
If you’re trying to encourage your customers to pay faster to increase your cash flow, then discounts for fast payments may help.
The discount doesn’t have to be large, but customers may appreciate a small amount of savings. Try several payment plans with different discount levels to reach more clients.
3. Watch your inventory.
Are you investing a large portion of your cash into inventory?
Inventory may be the lifeline of your small business, but you don’t want it to destroy your cash flow. The boxes of shirts, candles, or other items you sell shouldn’t sit in warehouses for decades.
Find a balance between having enough inventory to satisfy customer needs and having too much.
4. Raise your prices.
Are you keeping up with inflation? You might be able to raise prices on your products and services to keep up with the market.
Higher prices can lead to more cash flow, but they may also scare away customers. Find a balance that works for your business and your customers.
5. Consider collection agencies.
Do you have a large number of customers who haven’t paid their bills?
Collection agencies can help you recover a portion of the unpaid bills. They charge a fee and take a percentage of the money. However, you may not have the time to pursue the customers who haven’t paid.
6. Consider court.
For larger amounts, you may have to get a lawyer and take your customers to court for unpaid bills. This is one way to make your cash flow higher because it can force them to pay their overdue bills.
7. Offer prepayment rewards.
You can offer a variety of rewards ranging from discounts to extra products. You can make a special rewards program with gift cards or other items.
Customers who prepay for large packages, services, or multiple items could receive extra rewards. These rewards can encourage them to stay and keep buying your products or services.
Creating a customer rewards program with sales, discounts, and other special rewards is always a good idea to expand your customer base and gain loyalty to your business. Incorporate several of these strategies into your business operations to discover what works best for you.