ExecutiveChronicles|6 Ways to Help Increase Cash Flow Fast|Positive cash flow is vital for enabling your business to grow and succeed. Negative cash flow, on the other hand, can be detrimental. Even profitable companies can be hit with money issues from time to time. These issues can inhibit growth and even fail. So, what can you do about it? Here are six ways to help you increase your business’ cash flow fast.
Match Up Your Receivable and Payable Accounts
A gap between getting paid and when your payments are due can cause serious cash flow issues. If you need to pay your suppliers within 30 days but your customers have 45 days (or more) to pay you, you’re creating a significant gap that can leave you struggling financially. See it’s possible to more closely align your accounts receivable with your accounts payable to close that gap.
Encourage On-Time Payments for Invoices
Customers who don’t pay on time can seriously harm your cash flow. Send out email reminders a few days before payments are due. Follow up with another reminder on the day the payment is due and yet another when the payment is a few days late.
You can encourage early payments by offering discounts for doing so. Customers looking for deals are more likely to pay early (which aids your cash flow) when they get something for doing so. You can also reduce the likelihood of late payments by imposing a late fee for customers who don’t pay by the due date.
Consider Your Financing Options
You can boost your cash flow through financing. There are a few options available such as a short-term loan or opening a line of credit. You can also use an invoice factoring service, which buys up your unpaid invoices and provides you with the working capital immediately. Financing enables you to get the working capital you need for your business. You can use the money for such purposes as meeting payroll, purchasing new equipment or inventory, hiring new employees, paying business expenses, and more.
Look at Your Operating Expenses
While increasing the amount of money coming into your business is important, it’s also essential to examine what’s leaving. You want to reduce the amount of cash leaving as much as you can. You can do this by cutting out unnecessary expenses, replacing your old, inefficient equipment, and asking your suppliers for bulk rates. Instead of purchasing new equipment, consider leasing it. While you might pay more in the long run, leasing can help to lower your payment obligations, which means more positive cash flow for your business.
Evaluate Your Inventory
Your inventory is necessary to make a profit, but you need to make sure that what you’re stocking is actually selling. Monitoring your inventory is a must. Take a close look at what sells quickly as well as what tends to sit. Check your sales patterns and take note of busy and quiet times. Doing so can help you to more effectively order the right amount of inventory.
If you have any inventory that’s just not moving at all, you may consider liquidating it to make room for items that do sell. By liquidating the inventory, you may be able to sell it, giving you at least some money coming in for it rather than none.
Increase Your Prices
If you’re having a hard time with cash flow, you may need to consider raising your prices. Before you do, take some time to look at what your competitors are charging and if the prices of your inventory have increased. You should also make sure that you’re not undercharging. In some cases, pricing your inventory or services too low can make your company appear less professional or qualified.
Negative cash flow is a major issue, but that doesn’t mean your business is doomed to failure. There are plenty of ways you can take your financial situation and turn it around, giving you the positive cash flow that you need to grow your business and achieve your goals.