8 Ways Your Business Can Improve Cash Flow
A major goal of small business owners is to gain massive exposure and eventually grow to a point where profits far outweigh operational costs and new opportunities can be pursued. Maintaining a steady rate of growth is impossible however, if there is never enough cash circulating through your business. The costs of conducting business will always be a hindrance to your growth, and for a business with shrinking resources, this can be its demise.
Improving your cash flow also keeps your business in good standing with lenders and your employees. Transparency is almost a given in small businesses, and employees will begin to interpret payment interruptions and delays as signs of a bigger issue.
Whether you’re just getting off the ground or have started to notice less cash coming in, here are 8 ways your business can get the cash flowing again.
Require Down Payments
If your business specializes in leasing products or renting out services, getting a down payment up front in cash significantly increases your ability to cover costs. You can’t always rely on customers to fulfill contracts or agreements, which is why you should be getting something out of the transaction from the beginning.
Use Direct Deposit
Creating and sending out paychecks costs time and money, by utilizing direct deposit you automate the process and also make life easier for your employees.
Layaway services give your customers the ability to reserve a product but receive it only after they’ve finished paying for it. Your business gets a deposit up front, and if a credit card is used to secure a payment agreement between you and the buyer, there is less risk of payment negligence.
Host Equipment & Inventory Auctions
Old equipment doesn’t only slow down work operations but also takes up space. With some planning, your business could auction off outdated equipment and even excess inventory to the public.
When you do get rid of your old equipment, shop around for lightly used or refurbished equipment as a replacement. Don’t get too enamored with having the newest products on the market, as that will change with every year.
Institute Subscription-Based Options
Clients that use similar services every month should be given the option to pay for an allotment of services all at once. This will provide you with a better forecast for the year since you will know how your future costs stack up against your current financial outlook.
Enforce Late Penalties
Charging interest on late fees is a must, your customers will take advantage of you if word gets out about your lax payment policies. Every day a customer fails to make a payment, your company loses money. There needs to be a clear understanding between you and the consumer about the consequences of missed and/or late payments.
Secure an Inventory-Backed Loan
Inventory-backed loans can help during times of financial hardship, but not every lender will be open to the idea of lending your business money. Using your existing inventory to secure funds is a good idea if you know that your product can be turned around quickly, but since the loan depends on the type of inventory you have, this won’t work for every business.
Making smarter purchases for your business and weighing future risks are the best ways to ensure that your cash flow solutions are effective enough to encourage growth. If your business decides that the best solution is to partner with a company for funding, make sure it’s with a trusted organization that has your growth in mind.