Cash flow issues are always going to arise in business. An economic slowdown or shift in consumer behavior is something that is out of every business’s control. However, you can take steps to address issues when they do occur.
1. Automate Invoice Sending and Reminders
Cash flow issues in business often involve invoices being paid late. Late payments can occur for numerous reasons, but you can alleviate the most common ones by:
· Sending invoices out early
· Automating invoice reminders
If you have a proper invoicing system in place with reminders, it will encourage faster invoice payments, ensuring that you have a higher cash flow. Invoicing promptly will keep your daily sales outstanding low.
2. Use Software to Plan Around Your Cash Flow
Managing cash flow takes a lot of time and resources. You must either run calculations manually or use software to ease the burden. Utilizing a QuickBooks cash flow planner will empower businesses by:
· Making it faster to run cash flow forecasts and analysis
· Allow you to make smarter business decisions
· Adjust to periods of low cash flow early on
If you use software that integrates with your existing accounting solutions, you’ll have an easier time managing cash flow for your day-to-day operations.
3. Secure a Line of Credit
Cash flow issues for small businesses arise throughout the year. You may have an amazing quarter or even a year where revenue rises, but cash flow can still be an issue. Revenue does not equate to easing cash flow if a company has a lot of expenses.
What can you do to counteract immediate cash flow issues?
Counteracting cash flow in the short term requires capital and one of the steps that you can take today to help ease future cash flow issues is to take out a line of credit.
Lenders often extend a line of credit to businesses with a strong credit history. You can go to the bank that you already use for your company because they already have access to your financials to understand your business’s:
· Revenue
· Expenses
· Growth
A line of credit works like this:
· Secure a $30,000 line of credit
· Use $10,000 to make payroll
At this point, the line of credit still allows you to access $20,000. When you pay back the $10,000, you can still utilize the entire $30,000 credit.
The benefit of a line of credit is that you have full access to the funds as long as the line of credit remains open.
4. Reduce Unnecessary Expenses
Cash flow is a discrepancy between your revenue and expenses. Sit down with your accounting team to reduce:
· Overlapping expenses
· Unnecessary expenses
You can also renegotiate terms with suppliers to try and further reduce expenses. Maintaining a LEAN business will allow your company to maintain higher cash flow.
5. Upsell Items
Upselling items involves selling additions to your products or services, such as an upgrade. You may offer:
· $100 power washing of all decks in a home
· An upsell may include $100 for the decks and 20% off of a home power wash
Cross-selling items should also be considered. A cross-sell is when you sell a similar item or one that goes together well with what the customer is buying. For example, if a person is buying a power washer, you can cross-sell the cleaner to increase your average sales value.
6. Accept Online Payments
Offering more payment options is a benefit for your consumers who may want to pay by:
· Bank transfer
· Check
· Credit
· Debit
· Crypto
· Etc.
The easier you make it for your customers or clients to pay you, the faster you’ll receive payment. Allowing online payments is one of the easiest ways to cater to consumer needs while also alleviating any cash flow issues you may have.
Learning how to solve cash flow issues is one of many proactive approaches that companies can take to reduce future risks. If you address cash flow issues, you’ll limit your risks and take on less debt at the same time.
Bottom Line
Companies with cash flow issues should spend time creating a LEAN business that minimizes costs, boosts production and helps your business get through slow periods. Following practical advice to address issues before they impact operations is something every business manager and owner should strive to do.