Cash flow is the lifeblood of your business. A positive flow of cash means the business is running well and has the potential to grow. However, even when your business is experiencing a positive cash flow, don’t become complacent. Always be looking for ways to increase it.
The key to increasing cash flow is two-fold – increasing revenue and bringing more money in, but also managing the amount of money that goes out. Here are some practical ways to increase your business’ cash flow.
Reevaluate your prices
Is your product priced too low that it’s diminishing your earning potential? Or is it too high that customers are turned off? Once or twice a year you should reevaluate your prices to see if changes should and can be made.
If you are going to increases prices, make sure they’re within your target customer’s capacity. You should definitely take into consideration what your biggest competitors’ pricing looks like. If you go much higher than them, you risk losing customers to them. You can always raise prices to test the waters and see what the reaction is. If it’s negative, drop them back down. If it’s positive or neutral, you can stick with the higher pricing.
Send invoices immediately
If your business relies on invoices to receive payment, make sure you send them to clients immediately upon completion of a job, project or sale. Since customers have a certain amount of time to pay you from the date they receive the invoice, the sooner you send it, the sooner you can get paid.
Avoid any confusion by making your invoices as easy to read as possible. Clearly state the total amount due, the date it is due on and where the payment should be sent. It should also include notification of any fees that will be added should the client fail to make their payment on time.
Get your customers to pay their outstanding invoices on time
It’s no secret that clients don’t always pay their invoices on time, and this can cause gaps in cash flow. Before you work with a customer, perform a credit check to see what their credit history looks like. If they are consistently missing payments, they may not be someone worth working with.
If you have loyal, reoccurring customers who tend to pay late, be proactive in incentivizing them to pay on time. Offer them a discounted rate for paying early, or raise the fees for paying late.
Sell any excess or obsolete equipment or tools you have
Are you able to make any updates to your production and operations? Do you have any equipment that you’re simply not using that you can sell? Do you have any older equipment that needs to be replaced? You can try and sell the older equipment to make some cash that you can put towards purchasing new equipment so it’s not all coming out of your revenue.
If you purchase new equipment, are you able to expand your product or service offerings based on the capabilities of the new equipment? This could serve as an added revenue stream.
If you have a piece of machinery that you don’t use much and needs regular maintenance, consider renting it to other businesses. This would also create an opportunity for additional income.
Provide different payment options
Make payment extremely accessible for your customers by providing them with different payment options. If you are sending out invoices, can they pay by mail, through a bank deposit or online? If you have an eCommerce store, can they pay through credit card, PayPal, with a gift card, etc.? The easier you make it for customers to pay you, the better.
Whatever avenues you do choose, make sure they are clearly stated where you collect payment (whether it’s via invoice, online, via your app, etc.)
Having a positive cash flow requires managing the money coming in and out. You have to observe your customers’ behavior on how they settle their payments, encourage them to pay on time, and also manage the expenses your business has. This way, you can have a healthier and more improved cash flow to avoid compromising your business operations and grow your business more.
Get your customers to pay their outstanding invoices on time.Recommend0 recommendationsPublished in