When it comes to owning and managing a business, cash flow is often one of the bigger things on your mind each and every day. After all, your cash flow is going to be the telltale sign of how your business is doing from a fiscal health standpoint.
Not only is your business going to be able to cover more obligations should your cash flow increase, but there’s also the improved ability to save money and strengthen the walls should there be a financial upset in the market, or if you need to urgently onboard a new team member for damage control, as an example.
To add, businesses with great cash flow will be able to invest any profits back into the development and strengthening of the business, which means you have a greater ability to edge out the competition and solidify your place in the market.
Those points out of the way, let’s take a look at a few reasons why you might want to increase your cash flow and some effective ways to do just that.
1. Offer Perks for Faster-paying Customers
Depending on the business you own or manage, you might offer customers different ways to pay for your products and services. In many cases, this involves offering more time to pay, or the ability to offset the entire price of a service to be paid back at a later date.
For these instances, we suggest that you offer a perk for customers who pay back their debts to you faster, and there’s no better way to do this than through a discount program. If your customers can pay off their loans, debts, or any other financial obligations to you quicker, offer a small discount.
This won’t only get your cash flow increasing more quickly, but it has the ability to make your customers more satisfied with your business, which in turn means they’re more likely to speak favourably about you to their friends and family – and also return to do more business.
2. Lease Where You Can, Buy if You Must
When we talk about investments in products and services, we would typically suggest buying your goods outright – though not when cash flow comes into play.
You want to make sure you have as much free flow of your cash as possible in the business world, and with that, leasing your devices, white goods, or appliances and even choosing payment plans for your services is a good idea. This essentially means that you have more free cash to pay off obligatory expenses and services.
Another good point to keep in mind is that each of these payments can be deducted from your taxes at the end of each tax year.
For those moments when you do have to purchase a big-ticket item, then a carefully considered business loan is likely the way to go. Keep your cash flow in check and work to make the more wise choice of low-rate business loans. You can click here for more information on these types of loan solutions.
3. Prevent a Collapse in Hard Times with Payment Systems
One big killer of businesses is having a poor payment or reimbursement system in place for customers and staff.
When hard times do come around, and cash flow struggles a little, you don’t want to exacerbate this by relying on a slow or non-existent payment system for your products and services. Work to ensure that a payment automation system is in place that notifies your customers of when and how much they have due to your business, for example, and provide them with a one-touch payment option.
On top of this, adding the option of direct debit and automatic deduction systems is something to keep in mind too. This way you’ll have an even steadier cash flow given that you’re going to be able to rely on a computer to essentially collect your invoice payments for you.
4. Make Your Excess Cash Work for You
When we talk about cash flow, many business owners think of the ability to spend more, whether it be on items for the business, or bonuses for staff (read more about common types of bonuses companies give to employees). Though we would suggest injecting this cash and added profit into investments or high-interest savings.
In doing this, you’re utilizing your improved cash flow to grow your emergency savings fund, but also to work to grow for the business in the long term. In line with this, if your business is looking to grow steadily in the future you may even be able to lock this extra cash in a fixed-term savings account to better increase your interest amount.
5. Increase Goods and Services Pricing
To end, the best way to increase the cash flow is to simply charge more. However, there is a lot of work that goes into this.
If you increase your prices too much, you risk forcing your business into obsolescence and losing all of the customers you’ve worked hard to gain. And with this, we suggest a far-reaching research project into the costs of services by competing businesses, and why they charge this much (or little) for their services. Click here for a useful guide from Hubspot on how to raise prices.
In doing this, you’ll be able to know whether you can increase your prices, and by how much. If you find that some businesses offer a large increase in prices when compared to yours, determine whether you can do this too, and what needs to be offered with regards to products and services in order to justify this price increase.
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