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It doesn’t matter how well you think your business is going; if you’re continually having cash flow problems, you are in a vulnerable position. This is one of the main reasons why businesses end up closing. This problem can affect businesses of all sizes. Even enterprises with plenty of customers can wind up in trouble when cash flow is down. Working to improve business cash flow can bring long-term benefits and security to your business. It’s easier to do than you might think. We’ll run through some effective methods below.
Lease Rather Than Buy
Most businesses would have good cash flow if they didn’t spend money on big-ticket purchases. While you might have more than enough to cover everyday expenses, large purchases can eat you alive. If you need a piece of equipment bring your business to the next level, consider leasing it until you are sure it’s worth it. In many cases, it’s better to rent/lease machinery rather than buy it outright. You’ll still get the benefits of using the tool without the negative impact on your finances.
Get Paid Quickly
Remember earlier how we said that even businesses that have a lot of customers can end up failing due to cash flow problems? That’s because it’s not the number of sales you make that counts, but rather how quickly you get paid for those sales. You could make one hundred sales, but if it takes months for customers to pay, then you’ll be in a risky position. There are two ways to get paid more quickly. One is to send online invoices; they’ll ensure that your invoices arrive promptly and that they get seen. The other is to offer a discount for early payment. It doesn’t need to be a huge discount, even 5% can be enough to convince some of your customers to get out their credit card.
Increase Your Prices
If you need to improve business cash flow, consider raising your prices/fees. Many business owners are reluctant to take this approach as it could chase away customers. However, if it’s a modest increase, it’s unlikely to lose you any customers. If you’re scared of losing existing customers (or just simply making them unhappy), you can always keep them on the existing tariff and only apply the increased price to your new customers.
Rethink Your Workspace
Finally, if you’re renting an office or other space, consider downsizing or moving to a cheaper area. Renting an office in a downtown area can be extremely expensive, yet not always necessary. You may be able to save a significant sum of cash — and greatly improve your cash flow — by transitioning to a work-from-home setup. You could also move your operation to a coworking space, which is typically less expensive.
