There are lots of ways that you can determine the health of a business- but few are as indicative of success/failure as cash flow, that is the amount of cash going into and out of a business. Positive cash flow is critical for growth- but how can you increase your cash flow? Ideally, you want to increase revenue and decrease expenses- but it’s not always that easy. In this blog, we’ll take a look at 12 ways to increase your cash flow in 2022.
Income is a critical piece of the cash flow equation- but outflows add up quickly. Here are some ways that you can keep your operating expenses in check.
Work with vendors/suppliers
If you have a healthy, long-term relationship with vendors/suppliers, try to work with them to negotiate pricing, credit terms, or even establish discounts for bulk orders. This can help to reduce costs.
Re-evaluate your spending
Think about what you are spending. Are you paying for goods/services that you don’t need and can cut from your budget? No matter how small, expenses can add up. Therefore, take a closer look at your bills and figure out where you can cut expenses, even if just for a short time.
Increase your efficiency
This can refer to anything from how you schedule your employees to how you are using your utilities. Things such as using smart tech to control heating/cooling efforts, using efficient equipment and/or automated business software, and reorganizing workstations can make a big difference in the efficiency of your business which costs fewer utilities, inventory, and wages.
Again, income is a critical piece of the cash flow puzzle. Here are some ways that you can increase cash flow into your business.
Standardize your billing
When you’ve got a lot going on, it’s easy to allow some things to fall behind- but invoicing should not be one of them. Make sure that you send out invoices every month and be consistent with due dates. This will set clear expectations of financial arrangements between you and your customers- and can help you reach your financial goals.
Make payment easy
If you only allow one or two ways for customers to pay, such as cash or debit/credit, you may want to consider adding other options to adapt to the needs of your customers. This might mean giving them the option to pay online, set up auto-draft payments, or something else to benefit cash flow.
Implement invoice/accounting software
Payment/accounting software can make invoice processing easier, while also increasing speed and regularity. Chances are you won’t need new equipment, though a POS machine may assist with certain changes. If you don’t already use invoice/accounting software, consider it because it can help manage and organize all aspects of your finances.
Sending an invoice doesn’t necessarily mean the customer will pay and if your cash flow issues are due to lack of payment, you may wish to implement new payment policies. You may wish to offer customers an incentive to pay early or on time. For example, if a customer pays early, offer a small discount. For customers who pay on time every month for a certain period, offer a discount on a future product/service.
On the other hand, if customers are not paying, add penalties. A penalty/late fee for payments made a specified number of days late can entice customers to make paying your bill a priority. You can even set up a system for collections to get past-due invoices paid.
Of course, make sure that customers are aware of changes in your incentives/penalties by sending out letters in advance of implementation.
Consider invoice factoring
If you’re still struggling to collect payments, you might want to try invoice factoring. This is a process through which you sell unpaid invoices to a financing company in exchange for a percentage of the value upfront. Once the company collects, they pay you the rest minus their fee. Of course, this is not a long-term solution, but it can help if you’re in a cash crunch.
Upgrade Marketing/Sales Efforts
In some cases, the issue is not getting paid but in how much you are getting paid and how many customers you have. You may want to consider re-evaluating your marketing/sales efforts to increase cash flow.
Perhaps you are getting paid on time or maybe you don’t depend on invoicing. Your revenue issues may be the result of inefficient pricing. Are they so high that customers are going elsewhere or are you not charging enough? There are lots of reasons why your pricing may be inefficient- but before making any changes, take time to consider all of the factors and how things have changed over the last month, quarter, or year. Things to include in your evaluation are manpower/wages, equipment fees, supplier fees, vendor fees, and finally, competitor pricing.
Consider your current marketing efforts
It’s easy for marketing efforts to become stale/predictable, which leaves customers feeling less than excited about purchasing from you. That being said, take some time to consider your current efforts and how they are working for you. If you find that they are not working, make some changes to get your current customers more excited and maybe even grab the attention of new ones.
Identify/target new markets
Sometimes this just involves brainstorming new ways to market your product/service to customers based on need. Other times, you will need to do some research and look at the efforts of your competition. One way to reach new markets is via social media. This will put your products and brand in front of potential new clients and engage with them to determine new/existing ways you can market your product/service.
Consider online selling
If you are a brick & mortar company with a weak online presence, you may want to consider e-commerce. There are many easy-to-use platforms, such as Shopify or Etsy that may help. Of course, before jumping into online sales, evaluate the costs. Sure, it might increase cash flow- but it may harm your bottom line.
It’s important to understand that there is no single answer to increasing cash flow- and typically takes a combination of things. Take the time to consider the above tips and you should be able to build a more profitable business. Contact Commercial One Group today to help you with your income and cash flow issues.