For all businesses big and small, keeping a positive cash flow can be a major headache. Even during times of soaring sales, a business can be plagued by high expenses and cash flow problems. So, what’s a business owner to do when money is tight? Here are several tips to ensure cash flow is never a problem in your enterprise.
1. Trade Finance Alternatives
Exporting goods and services is a great way to achieve business growth. Unfortunately, exportation often comes with a delay of payment, especially if you decide to export internationally. Many small businesses cannot afford to wait, but that doesn’t have to mean you’re cut off from the global market.
This is where trade finance comes in. It allows the importer to pay on their terms with the exporter receiving payment right away. There are several trade financing alternatives including factoring, banker’s acceptance, discounting, and accounts receivable financing.
2. Reduce Late Payments
No matter how clear you are on your terms, many customers will still pay their invoices late. The best way to reduce late payments is to embrace an electronic billing system. Cloud-based online invoicing software gives you the ability to manage and track your company’s invoicing while giving customers multiple convenient ways to pay, thus making it easier than ever for them to pay on time.
3. Be on the Lookout for Ways to Increase Profitability
Did you know that fewer than half of businesses actually make a profit? Lack of profit is the number one reason most businesses fail. If that isn’t daunting enough, even businesses that generate a profit can fail.
For example, if your business is always reinvesting its profits, growth may be strong, but cash flow issues can arise at any minute. The best way to fix a profitability problem is to always be on the lookout for new ways to increase profits. This could include coming out with new products or services, product markup, discounts/deals to increase traffic, and consulting work.
4. Offer Discounts for Upfront Payments
If you have clients with deep pockets, offering a discount for immediate invoice payments is a great way to ensure a positive cash flow. In addition to improving your cash flow situation, offering such a discount may help you secure more clients in the first place.
5. Raise Your Prices
In the beginning, you may have set your prices a tad lower than the competition to entice customers in your direction. Now that you have plenty of work coming in, you’re likely finding out you have to work a lot more to see a profit. Maybe you underestimated the cost of doing business. Whatever the case, if you haven’t increased your prices in a few years, do it now.
No small business can survive on a slim profit margin. By increasing your prices, you’ll not only have more money coming in, but your company will also be better equipped to weather slow periods and late payments.
6. Get Rid of Old Inventory
The old, outdated inventory in your store does two things. It takes up valuable space, and it ties up the funds you invested in it. Rather than let old inventory sit on a shelf collecting dust, offer special deals to entice customers to buy. This will allow you to recoup your money and make room for newer, more profitable inventory.
Maintaining consistent profitability is a problem for most businesses. From late payments to old inventory, many factors influence cash flow. However, by following the tips listed above, you can ensure cash flow is never a problem in your business.