Keeping an eye on cash flow is essential for a successful business. You need to know how much money your business is making and how much of that money is available to use at any given time. To understand how much cash is coming in and going out of your business, use these simple tips to improve cash flow, run your operation more efficiently and grow your business.
1. Send out invoices right away
One of the most important things about cash flow is that it shows the difference between invoices issued and invoices paid. So rather than sending bills monthly, invoice as soon as work is completed. This will ensure cash flow isn't cyclical, and it will also mean that you aren't waiting for your customer to get paid at their month end before they decide to pay you.
2. Adapt and rotate your stock
Check your stock to see if anything isn't moving. These leftover goods hurt your cash flow because the money you spent to buy them doesn't turn into sales and generate income. You can fix this cash flow problem by selling these less-commonly bought items at a discount and not replenishing stock once you've sold everything you have. Similarly, going forward, you can concentrate efforts on investing in stock that you know sells well.
3. Don't buy equipment, rent it
Even though it's usually cheaper in the long run, getting new equipment and updating old equipment can be expensive and time-consuming. Instead, you could lease your equipment to save money in the short term. You won't have to upgrade or try to sell the old equipment you bought.
4. Monitor your operations and systems, often
Review your operations and structures often to find places where you can be more efficient. This will be done by constantly combing through your systems to see where you can save. This includes understanding your shipping costs, extra employees, overtime hours, marketing returns, late invoices, payments for rented equipment and stock on hand. As the market changes, so will the way you run your business. Always look for ways to improve your offering and invest your money into more efficient solutions.
5. Take out a loan before you need the cash
The best time to look for loans is before you have a cash flow problem. If your business is doing well or just starting to make money, now could be a good time to borrow. If you open a business line of credit when your numbers are good, you won't have to worry about being turned down later. This will also give you resources to fall back on if you run into any growing pains when you start your business. This is often a lifesaver for small businesses, especially seasonal ones.
Sometimes all a business needs is a quick influx of cash to either get you out of a tight spot or take advantage of a growth opportunity. Check out your options for lines of credit, business loans, and other ways to get fast funding, like a cash advance. Remember that you should only take on debt if it will help your business, but when approached strategically, you can make lending options really work for your business.
6. Keep track of your cash
It's not always a bad thing to get into debt. Borrowing money can be a short-term solution until your business is strong enough to stand on its own. But if you take on debt, you should carefully watch and evaluate how much cash you have coming in and going out. Borrowing money can be a good idea as long as you have a plan for how to pay it back. You should monitor your other costs and make adjustments where necessary.
7. Use technology
As a business owner, you should use new apps and software, as well as solutions that are made possible by artificial intelligence. These can help your business run more smoothly and efficiently. Technology can help with any part of your business and can also be used to plan your finances and cash flow. Use technology to monitor your business's accounts payable, accounts receivable, and other financial details in one spreadsheet. With these smart tools, you can easily budget and plan for future cash flow, and your business can benefit greatly from using the right technology and business tactics. These help you worry less about money coming in and more about running your business. You can always hire a CPA or bookkeeper to keep track of how much money comes in and goes out of your business. No matter who takes care of your cash flow, it has to be done.
The bottom line
Cash flow is like air for businesses. While this is a tricky skill to master, when done on a weekly basis, and by implementing these seven strategies, you will quickly find that your cash flow is healthier and you are more in touch with how your business ticks. If you need to fund your business in the next 48 hours, contact Merchant Capital and inquire about an SME cash advance today.