As a small business owner, you are in charge of a lot of things: finding customers, managing staff, overseeing day-to-day operations, and arranging and planning your budget.
Budget planning is essential to ensure you have cash on hand when required. But if you’re having cash flow problems and are not quite sure how you’re going to make it through the next few months, you’ll be happy to know that there are some solutions for you.
Here’s how you can effectively improve your small business cash flow.
1. Utilize funding opportunities
If your business relies on invoices sent out to customers for which you have to wait for payment, this could severely affect your cash flow. Even if you know that your customers will pay (eventually), you still need cash for different things, such as your utility bills, the salaries of your staff, and so on.
One way you can improve your business cash flow is by utilizing funding opportunities. This includes acquiring small business loans or making use of sources of funding which don’t require collateral, such as invoice financing, where you basically ‘sell’ your invoice to a third party in exchange for a cash advance based on the invoice.
2. Speak with your vendors and clients
Sometimes, it’s as simple as being honest with your vendors and clients. You can try speaking with your vendors and asking them if you can re-negotiate the terms of payment so that they offer you more time to pay.
If you are up-front and reasonable with your proposed payment terms, your vendors and clients will understand. Keep in mind that they are in business as well, so they will be more likely to understand your point of view.
3. Update your payment methods
If you would like to avoid late payments, you can try updating your payment methods and make it easier for your clients to settle their accounts.
There are now plenty of mobile and online banking platforms of which you can take advantage, and your clients may even appreciate the ease with which they can pay.
Electronic payments can also benefit you since you can have better control over your funds (when to withdraw them, for instance) and how and when your bills will be paid, which allows you to hold on to your funds for a longer time.
4. Take advantage of electronic invoices
Another way to improve your cash flow is to send out your invoices electronically. These electronic invoices can be sent out on a specific date, which saves you additional time and effort, and you can even offer discounts to clients who choose to pay early.