How to Manage Small Business Cash Flow
Cash flow is a measure of the funds moving into and out of a business. Ideally your company has more money coming in than going out, which means your cash flow is positive. Research shows that many small businesses fail because of insufficient cash flow. Here are some strategies that can help to keep your company’s cash flow strong.
Improve the Cash Flow Cycle
The length of your business’s cash flow cycle is an indication of how much planning you will need to do to keep your cash flow steady. You can shorten the cycle by insisting on partial or full payment up front for orders. If you must offer terms, keep them short, and offer discounts for prompt payments. During seasons of high activity, hire additional personnel. Purchase only what you need so you don’t have funds tied up in unused inventory.
Invest in the Business
Sometimes making investments in your company can improve cash flow by increasing revenue. For instance, you may save valuable time by hiring an accountant instead of handling the bookkeeping yourself. It may cost something to hire a professional marketer but your sales may drastically improve as a result.
Increase Profit Margin
Analyze your profit margins to be sure that enough cash is coming in to justify the efforts you are expending. Vindicate any raise in prices by keeping the value of your products or services high. To get an idea of what you should be charging, compare your prices with those of your competitors.
Boost Cash Flow Through Additional Funding
Often the best way to keep cash flow stable is by obtaining additional funding. There are numerous options available to small businesses, including working capital loans, lines of credit, and other possibilities. Outside financing enables you to have cash on hand for regular expenses, necessary purchases, unexpected opportunities, and emergencies.
For more advice on managing the cash flow of your small business, contact Charis Commercial Capital.