15 Financial Strategies That Can Boost Your Business Cash Flow
Money plays an important role in society because it can give you the freedom and chance to make your current situation better. When you have enough, you can comfortably decide how you live each day and support the things you are most passionate about. Other than using it to support your needs, money is also a major factor in maintaining a business.
When you own a company, cash acts as a lifeline for your organization because it fuels each process of your operations. Hiring employees, getting supplies, marketing your products, and providing customer support all take some form of financial capability. When managed properly, your business can gain cash flow to help you achieve your goals and grow your brand.
What is Cash Flow?
Cash flow refers to the movement of money that goes in and out of your business. Inflow specifies the net amount of money your business earns through sales or income. On the other hand, outflow talks about your total expenditures during a specific financial period, like paying for your loans or employee salary.
Organizations keep track of this data through statements that give you exact details on each transaction. Positive cash flow shows improvement on your assets, while negative cash flow shows your losses.
Why is Building Cash Flow Important?
Building cash flow keeps your business running and gives you an idea of how your operations are doing. If your statements are accurate, you become more aware of how much money you are spending and earning at a given time. Through this, you can make better financial decisions and understand the value of each investment you make.
10 Benefits to Good Cash Flow Management
Knowing how to manage your cash flow properly is essential in leading your business to success. Not only does this teach you how to handle your finances better, but you also gain many other advantages too. Here’s a look at some of them.
#1. No delays in payroll
Maintaining payroll is an integral part of managing your business. If you fail to compensate your workers adequately, the quality of your production can go down, and you could lose people who help keep your business operational. But, with proper cash flow management, you will always have enough funds set aside to pay your team.
#2. Always have available resources
Making a product means you need to buy resources to build it and improve its quality. With proper cash flow management, you can have a clear idea of your account payables, letting you buy the supplies you need. You can also use this to prepare for seasonal peaks ahead of time to meet rising demands.
#3. Faster business growth
Many business owners want to gain success through their company and create new opportunities for the future. This can be possible through carefully managed cash flow. Through this, you can spot major issues in your business strategy right away and fix them before high risks are at stake.
#4. Ease of mind
The thought of missing on payments and not being able to cover your expenses can be stressful. But if you have good cash flow, there is less need to worry about making a profit through your business. This can help reduce your worries and allow you to maintain better health too.
#5. Less risk of overspending
Knowing how to manage your cash flow properly means you can control how much money you spend for each obligation you have. Through this, you gain better insights into your spending habits, which can help you make better investments later.
#6. More purchasing power
Having positive cash flow opens the chance to increase your budget range on specific operations. This will help you expand your production line or introduce new products and services to stay ahead of other competitors in the market.
#7. Determine the profitability of your business
Good cash flow management helps you analyze the profitability and liquidity of your business. Through collected statements, you can always see what investments are working and what operations need to be improved.
#8. Better financial planning
All successful businesses need to plan and coordinate their finances to keep operations running smoothly. Good cash flow management allows you to see how each sector of your business is doing and make necessary changes to your strategy. It can also help you plan out your budget and financial objectives for the future.
#9. Settle debts faster
Generating good cash flow indicates that you have more money coming into your business that you can use to settle your debts faster. This can help you increase your credit score with your bank and give you the chance to avoid paying large amounts of interest.
#10. Quicker tax settlements
Good cash flow management gives you better organization over your data. This can help lessen your workload when you need to settle tax payments. As such, processing times become quicker, and you show good compliance with the government.
15 Ways to Improve Business Cash Flow
Cash flow can fluctuate up or down depending on many different factors. That’s why it is crucial to monitor your finances regularly to find ways to improve your operations. Below is a list of a few strategies you can use to boost your business cash flow.
1. Control access to your bank accounts
Protecting your assets is an important step you need to take to maintain a positive cash flow. You can do this by restricting access to your business accounts and ensuring that you have the proper tools for robust cybersecurity measures.
2. Get a small business loan
Short-term loans can be used to give you a head start on your business and create an opportunity to take on profitable projects. Through this, you can get the supplies you need to make and sell your products which can help grow your cash flow.
3. Plan out future expenses
Using your old records and statements, build a forecast for your business based on your assessment. Carefully monitor this data and see if you can find any patterns. This can help you prepare enough funds to get through painful periods during the year or seasonal trends.
4. Manage payable processes for your accounts
Building an organized process for your cash flow management can help your team settle each invoice without worries or delays. This strategy involves investing in the proper tools to help ease the workload, create clear communication lines, and form stronger relationships with those you do business with.
5. Outsource your business functions
Outsourcing certain parts of your business allows you to save more money while getting the right talent you need for a role. This solution is also not limited to a specified department since service providers can offer their expertise on multiple subjects like accounting, HR management, and marketing.
6. Send invoices immediately
Another way to improve your business cash flow is to send your customers invoices right away. You can also increase the chances of faster payments by using other strategies like sending follow-up reminders or charging a penalty fee for late payments.
7. Make payment methods easy
Using multiple forms of verified payment methods gives your customers more flexibility and convenience when settling their invoices. This can include accepting payments from credit cards, debit cards, or online wallets.
8. Make use of idle cash
Idle cash can be recognized as the money you have that is not earning you any income or benefits. There are many ways to put this money to work, such as transferring them to an interest-bearing account or using it to invest in your business.
9. Increase your prices
Boosting your prices can help you improve your cash flow and keep your products competitive in the market. Despite how well your products may be doing now, the amount you charge should always reflect how you manage your operations.
10. Use a sweep account
Sweep accounts can help you maximize your earnings through income by automatically transferring them to a savings account. This is a common service offered by banks that can help improve your cash flow management. Through this, you can set your transfer limits and their frequency.
11. Introduce new products and services
Adding new products and services allows your customers to get excited about something new you are providing. This can either be a permanent addition to your product line or a seasonal item paired with new marketing projects.
12. Evaluate your operating expenses
Cash flow can also improve if you take the time to re-evaluate your expenses and cut off any unnecessary costs. If nothing can be removed, consider looking for cheaper alternatives from other sources.
13. Negotiate with your suppliers
If your business has been working with a supplier long-term, you can negotiate better inventory rates and terms. This can help you manage your relationship while getting better value for your money. You can also compare if other suppliers can provide that same quality of supplies for a lower price.
14. Take advantage of a savings account
Using savings accounts allow you to grow your money slowly through annual or quarterly interest. Leaving a set amount of cash in a savings account can help you earn some extra finances while setting aside a cash flow cushion for when you need it most.
15. Invest in accounting software
Using up-to-date systems and technology can help you manage your finances quicker and more accurately. It also becomes a more convenient way to keep things organized and efficient.
Building Your Wealth
Money is an essential tool that everyone needs to survive. For business owners, it acts as the lifeforce that keeps operations running at a suitable capacity. As such, you should always look for new ways to improve your cash flow to achieve your goals and grow your company.
Given that each brand and industry are unique in its own way, you will need to utilize your resources to find the best strategy that meets your needs. You can better understand how you can manage your finances properly and gain better leverage against your competitors through this.
About the Author!
Ralph is the Head of Product for Earlypay invoice finance platform. Having been in the industry for many years now, he writes content that aims to help small businesses grow.