The Best Ways to Improve Small Business Cash Flow
There’s no single indicator that can tell you the health of your small business. But if you want to ensure you can always pay bills — and grow your company — having a steady and reliable cash flow is vital.
When someone suggests that you improve your cash flow, you might think that this sounds like simple advice. In reality, it’s easier said than done. Whether you’re considering selling your business or just want to focus on growth, check out these tips to boost your cash flow.
Send Invoices Quickly
Your business’s success is based on the services you provide, the products you sell, or both. But in many cases, you don’t get paid until you invoice your clients! If you want an even, predictable cash flow, make a habit of sending invoices promptly.
Make sure your customers understand your payment terms. It may be helpful to offer discounts for early payments and to charge penalties for late payments.
Raise Your Prices (Without Losing Customers)
If you have a loyal customer base, you might be reluctant to increase your prices. But in times of high inflation, running a business has become more expensive than ever. High expenses can cut dramatically into your cash flow, so to counteract that, raising your prices might be necessary.
If you do raise your prices, explain in plain language why you need to do so. For instance, if you tell your customers your operating costs have gone up by a certain percentage, they will understand why you’re increasing your prices.
Consider Leasing Your Equipment Instead of Buying It
It might seem like purchasing equipment is the best thing for a business. However, expensive equipment purchases can both drain cash reserves and severely impact your cash flow.
In many cases, leasing equipment will prove to be better for your cash flow (and for the business as a whole). The monthly payments for a lease are often much lower than loan payments. And if you decide you want to upgrade, it’s much easier to lease newer equipment than to sell your current equipment and make a new purchase.
Find a Business Savings Account That Earns Interest
Like individuals, businesses can benefit from a quality savings account. While interest rates vary significantly by bank, it’s possible to find some business savings accounts that pay a decent amount in interest. Make sure to take advantage; unlike riskier investments, savings accounts keep your money completely protected while also helping you earn.
Don’t Over-Purchase Inventory
Many suppliers offer a discount if you purchase large amounts of their products at once. It might be tempting to take advantage of these discounts by purchasing far more inventory than you currently need.
However, bear in mind that when you make purchases like this, you’re tying up cash that might be put to better use elsewhere. A better goal is to make sure you have enough inventory to meet customer demand, but not so much that you essentially have cash sitting on the shelves.
Considering Selling Your Business?
If you think you may be selling your business in the near future, you already know that optimizing your finances in any way you can is helpful. Fortunately, many of the tips above don’t only help you boost cash flow; they also show potential buyers that you manage your finances responsibly.
When you have good financial records, you’ll also have an easier time getting an accurate business valuation. Sunbelt’s quick and free valuation calculator can help.
Selling your business poses challenges that many business owners have not previously considered. But when you work with Sunbelt, you gain access to a team of dedicated experts. Our business brokers can help you connect with a suitable buyer and negotiate the right deal. Get in touch with us today.