Cash flow is king in businesses large, medium, and small. Increases cash flow can keep your business afloat and help you, as the business owner, to sleep at night. There is nothing worse than the feeling of running low on cash and worrying yourself sick over where the next lease payment on your space or your next round of payroll checks is going to come from. You cannot effectively lead your business if you are constantly fighting just to remain solvent.
Fortunately, there are some time-tested methods of bolstering your business’ cash flow. Here are 5 ways to boost your business cash flow.
Cash Flow Tip #1: Slow Pay (if You Can)
Although the practice is thoroughly shunned in the world of consumer credit, in business, most vendors offer 45, 60, or even 90 days to settle the bill. Work this to your advantage, using capital on hand to keep your business going while you make more money. That will keep your cash flowing while making it less painful to settle up the account when the time comes, after you have kicked the can a little further down the road. Just be careful not to test the patience of a reliable vendor by actually being late, outside the net due date per your agreement with that vendor.
Cash Flow Tip #2: Incentivize Early payment
On the other end of your bookkeeping operation, accounts receivable, that is, you should do the opposite. Offer a scaling discount for payers who settle their accounts early. Put it on a sliding scale: pay by the 10th, get a 10% discount; by the 15th, a 5% discount. Remember, a payment that clears today is money that you can count on tomorrow.
Cash Flow Tip #3: Adjust Your Pricing
Is the reason you are experiencing cash flow challenges because your prices have not remained competitive, meaning that you are undercutting not only your competitors but yourself? If this is the case, you have to raise your prices accordingly. This can also mean shifting around pricing, making popular items less expensive to sell more volume while increasing the price of non performers. You simply need to look carefully at your full product assortment to see where opportunities lay. The case may be that your top selling item will continue to sell well, even if it goes up 5% in price.
Cash Flow Tip #4: Use Credit
Obtaining a line of business credit can free up even more cash. Why spend much needed capital on office supplies and other small expenses, especially given that such expenses at up. Keep your capital and use credit for the cruft will allow your cash to be reinvested in channels of your business that actually make you money. You can then use that capital to pay off your debts before incurring interest.
Cash Flow Tip #5: Grow Interest
If you are using a standard business checking account, consider switching to an interest bearing account. That way your money works for you!
About the Author
Morris Edwards is a content writer at CompanyRegistrationinSingapore.com.sg, he writes different topics like Singapore is better positioned than any other Asian country to cash in on an increasingly digital world and Singapore Has Established a Lucrative Innovation Fund for New Enterprises and all topics related to Business, Tech and Company Setup in Singapore.