7 Game-Changing Tips That Will Improve Cash Flow in Your Business
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90% of startups fail. Do you know what those 90% have that the successful 10% of businesses don’t?
Cash flow issues.
Cash flow in business is the amount of liquid funds that your business has to spend at any given moment. That cash flow might be used to pay vendors, invest in marketing or buy your way out of an unexpected problem.
If you’re a business that’s rich when it comes to assets but poor when it comes to cash, you’ve got problems to figure out.
Below, our team shares 7 game-changing tips that you can start utilizing today that’ll substantially improve cash flow and your company as a whole.
1. Lease Equipment
Equipment is easily one of the biggest cash hogs in a business. Big-rig trucks, commercial mixers, metalworking machinery; all those tools can run you tens of thousands of dollars.
All of that money is cash that you could be investing elsewhere rather than having it tied up in your warehouse.
We get that you can’t do without the equipment that you use but what you can do is lease instead of buy.
When you lease equipment, you pay a monthly fee to use it and at the end of your lease term, return the equipment to lease something better or re-up your lease to continue doing business as usual.
By paying low monthly lease fees instead of a massive upfront buy cost, you’ll have plenty of money laying around to use as needed.
2. Reduce Pay Periods
Your employees want to get paid as many times per month as possible. After all, they’d rather have money sitting in their bank accounts, not yours.
While wanting to get paid multiple times per month is reasonable, handling your payroll like that is not only cumbersome but is hurting your company’s liquidity.
To improve cash flow immediately, reduce your pay periods to once per month. That way you can build up your cash on hand during 30-day periods as opposed to 7 or 14-day periods.
3. Find a High-Interest Savings Account
This point ties in wonderfully to our last point and frankly, everything else that we’re going to discuss in this blog post.
When your cash flow is strong, you’re going to have a lot more money in your possession. So then, what should you do with that extra money if there’s not an immediate business need for it?
You should have it sitting in a high-interest savings account.
There are many business savings accounts out there that offer 2.3%+ in interest. If you let $100,000 sit in one of those accounts over the course of a year, you’d make $2,300.00 doing nothing.
4. Send Out Your Invoices Fast and With Better Terms
The moment that you have the green light to bill a vendor, bill them. The longer you wait, the longer that it’s going to take for you to get paid. The best thing to do is to make sure you’ve got the best accounting system, and get help with your Stripe to QuickBooks integration, for example, if you need it – it could make a massive difference to how quickly you’re paid.
Furthermore, if you’re working with a vendor whose billing terms are “net-90” (90-days until they have to pay), negotiate better terms.
Allowing your vendor 3-months to pay their bills is them trying to improve their cash flow at the expense of yours. Get the people that you do business with down to net-30 terms and if they refuse to negotiate, find another vendor.
5. Start Accepting Digital Payments
The easier you make it for your customers to pay you, the faster that you’re going to get money flowing through your accounts.
Gone are the days where the best way to collect payments was via receiving a check in the mail. Today, digital payments reign supreme.
There are a lot of digital payment providers out there like Netsuite electronic payments that offer great service at variable rates.
Compare and contrast a handful of payment solutions to see which one is able to offer you the best deal on the best service.
6. Improve Your Inventory Practices
In a perfect world, you’d only ever have as much inventory on hand as you absolutely need at any given moment. We understand that’s a hard standard to meet given the variability of demand.
Still, you should do your best to manage your inventory as effectively as possible with the help of analytics.
Keep track of the speed in which your inventory moves by paying attention to what sells and what sits. After analyzing your findings, try and order your inventory at a pace that reduces the amount of time items spend parked on your warehouse floor.
You can always hire a data consultant to help you make sense out of your analytics if you’re not particularly great with numbers.
7. Leverage Debt Effectively
Debt is oftentimes used as a dirty word in the business world. What a lot of people don’t get though is that debt is actually an incredible tool to improve cash flow when used effectively.
For example, if you took on a 5-year $20,000 loan at a 15% interest rate so you could lease another truck, the payment on that loan would be $475 per month. If that additional truck is making you $2000.00 per month after expenses, you can see immediately how taking on a loan to put more cash into your pocket was a worthy investment.
It’s moves like that which separate businesses that stay small from those that absolutely flourish.
Wrapping up Game-Changing Tips That Will Improve Cash Flow in Your Business
Your business is only as powerful as the amount of capital it has to spend on investments. If you don’t have cash flow, investing in things that could make your business more profitable is impossible.
By using our tips, you’ll break through your cash flow barriers and unlock your company’s full potential!
We wish you the best of luck as you work to improve cash flow in our company and invite you to read more of the business content on our blog if you’re looking for additional tips to grow.