Small business owners know the importance of working capital, but sometimes the challenge of keeping up with routine bills along with unexpected expenses creates a problem.
For some, not having funds at the right time can lead to insolvency and bankruptcy, but a little ingenuity can keep a small business afloat. One of the biggest sources of working capital is cash flow, and it can be maintained with careful planning and forethought.
Make Cash Flow Work for You
You know the old adage: the only constant is change. The same goes for your business. Just because things are how they are today doesn’t mean they have to (or will) remain that way.
As a small business owner, being flexible will help you make changes to fit your current financial situation. Your cash flow is not static, and it can be improved through changing your dealings with consumers, vendors, and other businesses.
Seven Cash Flow Builders
1. Deposits: If you are in a business selling products or services that take time to deliver, request a deposit. This generates cash flow while waiting for fulfillment.
2. Discounts for speedy pay: Promote early payments with discounts. A little incentive can go a long way to getting what you’re owed.
3. Delay expenses: Do not buy things early, exhaust your inventory, and cut personal expenses. Your cash flow will thank you, and you can go on vacation when the time is right.
4. Work with your vendor: Vendors are rarely adverse to negotiation. They want your business, so request better payment terms.
5. Finance: If you can’t afford your purchases, finance them. Don’t run your cash flow down to the minimum in order to keep inventory.
6. Get rid of the junk, or lease it: If you’ve been in business for over five years, it is likely you have a storage room or rented space filling with the ghosts of ideas past. Lease or sell unused equipment. It will put some cash in your pocket.
7. Sell your invoices: This requires engaging in B2B practices instead of cultivating consumer relationships, but getting payment from a customer who has a significantly overdue invoice could require substantial time and effort. Selling invoices guarantees some payment, and it leaves the trouble of processing and collection to someone else.
These ideas won’t work for every business, but most businesses can apply at least one of these seven ideas to their current or future plans. What’s most important is that you understand the importance of cash flow management and are prepared to adapt to make ends meet.
Contact us for more ideas on cash flow management.