As a small business owner, your cash flow is one of the most critical aspects of your finances. Without proper management and planning, your expenses can quickly outgrow your income, leading to avoidable financial trouble.
For many entrepreneurs, monitoring balance sheets feels like watching paint dry. You’d rather instead be interacting with clients, building new products, or dreaming of ways to grow your business. Cash flow might not be a glamorous topic, but it is vital to helping your business expand. In this post, we have six simple tips to help you free up your cash flow and inspire you to get excited about your finances.
1. Lease Instead of Buying
Does your company need to invest in new equipment to grow? Are you in need of replacement equipment? The next time your business needs to make a large purchase, you may consider leasing the item instead of purchasing it outright. In general, a lease is easier to obtain than a loan and can help you manage a low monthly payment instead of a sizable outright purchase.
2. Automate Invoices
One common issue that many small businesses face is tracking down payments. However, you can’t expect to have a reliable cash flow if you don’t send out your invoices on time. With many software options available to automate billing, invoices, and payments, there is no excuse not to get paid on time. When you communicate your payment process, your clients will know what to expect and be more likely to pay by the due date. For the clients who don’t pay on time, you can set up a specific payment schedule that will motivate them to start making payments on time.
3. Offer Discounts for Early Payments
One strategy you can use to encourage your clients to pay on time is to offer a discount for early payments. While not every client will take advantage of this offer, the price-conscious ones will. A slight discount will be worth the guarantee that some payments will be ahead of schedule. Not only will there be money in your bank account quicker, but you’ll also save some of the time you’d usually spend following up on late payments.
4. Increase Prices
Another way to increase your cash flow is to raise your prices. If you are a service provider, you are constantly gaining more skills and expertise each year in business. As such, raising your prices to match competition, inflation, and your offered value is expected. If you sell physical products, you can also increase your prices to match the rise in supply and production costs. A good rule of thumb is to look over your pricing once a year (usually at the beginning of the calendar year) to determine whether your pricing is still aligned with your business expenses.
5. Assess Accounts Annually
How often do you assess your accounts – not just your financial statements, but your recurring bills and subscriptions? Are there services you pay for that you’re not using? Maybe a new competitor is offering better prices, or maybe your software has a new bundle deal you didn’t know about. It’s worth taking the time to assess exactly what you’re paying for to see if there are opportunities to reduce your expenses. Track this data throughout the year and use it annually to determine how to increase your cash flow.
6. Prune and Improve inventory
In addition to paying attention to your flow of income and expenses, you should also be monitoring which of your products, services, or offerings are selling more than others. Suppose you have a particular item that is not selling, but rather is draining resources or money from your business. In that case, you should consider pruning it and investing that time and money into your offerings or products selling well to increase your revenue stream.
Get Your Business Cash Flow Forecast with an Edmonton Accountant
You can start managing your cash flow with Schwan & Associate’s free 30-minute consultation. Our team of chartered professional accountants will send you an online questionnaire ahead of the consultation to ensure we have relevant information to help create your custom plan for growth. After your consultation, we’ll help you put steps in place to start moving toward more freedom in your cash flow.
