5 Ways to Improve Your Business Cash Flow

It’s often described as the lifeblood of any business, so it stands to reason that business owners around the land should be doing their utmost to improve their cash flow.

Let’s not forget that poor cash flow management is one of the main reasons businesses fail. Worryingly, this can happen to seemingly successful businesses. It hasn’t been unheard of, as an example, for a thriving, growing business to suddenly fold because it can’t meet its financial obligations – all because it didn’t have enough cash coming in to meet its outgoings.

The good news is that there are things you can do to ease your cash flow woes and get your business back on track. Here are five of the best:

Review your pricing

Are you charging enough for your products and services? It’s a common mistake for businesses to underprice their offerings, thinking this will make them more competitive. In actual fact, it could be having the opposite effect and eating into your profits.

Conduct a review of your pricing structure and make sure you’re not selling yourself short. This doesn’t mean you have to put your prices up overnight, but you could consider implementing a gradual increase (particularly in the current economic climate).

Get paid on time

Late payments are one of the biggest causes of cash flow problems, so it’s important that you have systems and processes in place to ensure you’re paid on time.

One way to do this is to invoice your customers as soon as the work is completed rather than wait until the month’s end. You could also consider offering discounts for early payments or charging interest on late payments.

Monitor your inventory

If you’re carrying too much stock, it could tie up valuable cash that could be used elsewhere in your business. On the other hand, if you’re not carrying enough stock, you could miss out on sales.

It’s important to strike the right balance, and the only way to do this is to keep a close eye on your inventory levels. Use data and analytics to help you make informed decisions about stock levels and order quantities.

Stay on top of your expenses

It’s easy for business expenses to spiral out of control if you’re not keeping a close eye on them. Review your expenses regularly and look for ways to cut costs.

There’s no need to cut back on essential expenditures, but there may be some areas where you can make savings. For example, you could switch to a cheaper professional indemnity insurance supplier or negotiate discounts with your current providers.

Review your debtors

If customers owe you money, it’s essential to chase up these payments as soon as possible. The longer you leave it, the less likely you are to get paid.

Again, data and analytics can be useful here, as you can use them to identify which customers are most likely to pay on time and which are at risk of defaulting.

Photo by Katie Harp on Unsplash