How To Improve Your Business Cashflow!
💸 As a small business owner it can be difficult to optimally manage your cashflow. You’re trying to build your sales, pay your bills and pay yourself at the same time so making the right decisions with your cash can be tough!
Being smart with your cash will help you to build a better business. You will have less stress worrying about how you will be able to pay your bills if you have good cashflow.
So if you are struggling with maintaining a healthy level of business cash then try these simple ways to improve it:
Liquidate Your Old Assets
If you aren’t using an asset and it isn’t being used to generate your business income then sell it! This is a very simple way of giving your business a much needed cashflow boost. Whether it’s an old laptop or a piece of equipment, if they are just collecting dust then chuck them up on gumtree or facebook marketplace and turn them into cash for your business.
Don’t Pay Cash For Big Assets
Assets like vehicles, machinery or equipment can be leased or financed to avoid a losing large chunks of cash when purchasing outright. Monthly repayments will end up costing you more in the long run but this can be a smart short/mid term solution while you are building your business. This allows you to put your cash to better use, like purchasing more inventory to widen your product range or funding marketing campaigns to bring in new clients. There is also a tax benefit as your interest on a finance agreement or lease repayments are tax deductible.
Send Out Invoices ASAP
You can’t get paid until you have sent an invoice so make sure you are sending them as quickly as you can. You can now use Apps for your invoicing! Xero, Tradify, Invoice2go, Square, the list goes on.. What ever software you use take advantage of its ability to invoice on the go. This will help you to make sure your invoices are sent as soon as your job is completed so the customer has the greatest amount of time to pay the bill before the due date.
Chase Up Your Outstanding Invoices
There can be a lot of money tied up in outstanding invoices. Customer accounts can quickly fall overdue if you are not keeping a close eye on your debtors list. Make sure you are checking your report to see what invoices are overdue or approaching their due date. Send out reminder emails or make a quick phone call and politely explain that there account is overdue. You could start by saying your just double checking they received their invoice so it doesn’t sound like you are pressuring them for a payment. You don’t want these invoices to go on unpaid and turn into bad debt.
Offer Early Payment Discounts
It’s also important to check how quickly your customers are paying you. If you do find that a lot of your customers aren’t paying their bills until after the invoice due date, you might want to consider offering a small discount for an early payment. If your allowing 14 days until the due date offer a 5% discount for payment within 7 days. It could even be “Pay within 7 days to receive 5% off your next order” to encourage repeat customers.
Take Advantage of Bill Discounts
On the other hand if you have been given the option to get a discount on your bill payments take it! This is a no brainer, you are going to have to pay the bill no matter what so if you can reduce the cost of your bills thats more money for you. Even if the discount is only small it will add up to a noticeable difference if you can consistently apply this to your business. It will just come down to building good habits when reviewing your bills.
No Discount? Then Hold Onto Your Cash
If you don’t have the option to pay early for a discount, then hold your payment until the due date. It is still important to make sure you are paying bills as they fall due to avoid any additional late fees or interest. But the idea is that the money is better off in your hands, this way if something does go wrong or a unique opportunity arises you have cash available. This will require a bit of discipline o your behalf to monitor your accounts payable and cash levels to make sure the bills are paid on time but it will help you to keep healthy cash reserves.
Wheres Your Money Going?
Always review your expenditure, find out what you are spending the cash that you do have on.. Cutting down on your spending is probably the easiest way you can improve your business cashflow! You will be surprised at all the different things that you have purchased and at what your money is actually being spent on to run your business. You need to work out what is important expenditure and what isn’t. If it isn’t providing value then cut it out. I can’t tell you how many businesses I have worked on that have been able to cut down unnecessary spending and immediately improve their cashflow.
When all else Fails, Review Your Margins!
If despite all these tips the cashflow problems continue, there could be issues with your margins. This could be a revenue issue, maybe your business simply hasn’t started to earn enough consistent income to cover all your overhead costs. It could be a Sale Price issue, where you may not be charging the right price. It might be an expense issue, you might be spending more on rent or wages then you should be. These issues are a bit more complex but they can be a significant cause of your cashflow problem and if left unchecked can affect the long term sustainability of your business.
This is something we can work through with you by taking a close look at your reports.
✅ We can show you how to review your reports to identify any cashflow issues you may be having and then provide you with the strategies to solve them