7 Ways to Improve Cash Flow in Your Small Business
04 Jul 2019
These days, you would notice an increase in the number of start-ups emerging in India. While most of these businesses are getting financial aids from government schemes and business loan facilities from several loan providers, it is important to note that making that business a success and maintaining that successful business streak further is no mean feat.
Statistics show that most small businesses shut down within two years of their inception. This is because most entrepreneurs lack the vision to think out of the box and fail to implement business strategies to improve the cash flow in their business. An improved cash flow depicts a positive image for any business’ success. However, this cash flow cannot be achieved by simple ‘producing and selling’ approach. As a business owner, you must think about different ways to financially equip your business with continuous cash flow. To achieve the same, below listed are 5 ways through which you can improve the cash flow in your small business.
Build a Good Finance Team
You pick out any success story and you will find that teamwork plays an important role. Thus, if you want your business to succeed, it is important that you form a good team who are experts in the necessary business fields. Thus, on the same line if you want to improve the financial condition of your business, it is crucial that you hire competent financial experts to your team. These experts can help strategize several operational financial plans to improve the cash flow in your small business. If you feel that your business cannot afford to hire an experienced team of financial experts, you can opt for availing the services of independent accounting firms. These firms can perform the weekly/monthly/annual audits for your business and help you in forecasting the budget for the financial years. Not only that, but these experts can further guide you about various tax-saving avenues for your business. These experts can further provide efficient solutions for working capital management between clearing the dues of any small business loans and directing the profits towards internal business operations.
Incorporate Automation in Your Invoicing
Incorporation of technology not only improves the efficiency in your business operations but also eliminates the need for any human workforce to manually perform the task. This, in turn, helps save on worker wages, subsequently leading to increased profits. One of the biggest use of technology that you can incorporate in your operations is automating your invoicing. Automation in invoicing helps in raising timely invoices to your clients. It also ensures that you receive your monthly payments on time, ensuring better mitigation of your internal organizational finance for different business purpose such as paying salaries, buying raw materials or advertising their product. This automation also helps forecast your estimated accounts receivable for the financial year and better strategizing your next business move.
Widen Your Payment Options
Most small businesses start their operations locally and then expand to national and international markets. While the business is going through this transition, it is advisable that the small businesses widen their payment options to become at par with competitors like online retailers and multiple store chains. Sticking to only a particular payment option limits your business’ opportunity to expand. Exploring the payment options also provide your customers with the diversified mode of payment, making them more inclined to choose you instead of your competitors. The different payment type that your business can adopt include payment via credit cards, debit cards, or through automated clearing house (ACH). Moreover, you can also expand your business payment options to digital payments wallets such as PayPal, Venmo, Apple Pay, etc.
Maintain Goodwill within the Industry
Maintaining goodwill and cordial relation with your customers, retailers, or even competitors could prove extremely profitable in the long run. It is extremely important to start networking and building a relationship right from the start of your business venture. Being cordial with your business loan provider from the start can help you get heftier SME business loans in the future. Moreover, offering exciting deals and discounts to your customers on repeated purchase can ensure a loyal customer base for your business. Cordial relationship with your competitors might even turn into partnerships and collaborations later, which could significantly boost the cash flow in your business.
Increase your product price
The simplest and the easiest strategy to improve the cash flow in your small business is to simply increase the price of your product. However, this strategy must be carefully implemented as chances of it going either way are high. If you feel that you have earned a significant recognition in the market and now is the right time to increase your product prices, you might do so by checking what your competitors are offering and whether your rates are indeed affordable by the customers.
The above-mentioned tips can surely increase the cash flow in your small business. If you feel that you cannot implement all these tips into your business operations yet, You should take one step at a time and slowly witness your business evolve. Also, in case you face any cash crunch while incorporating either of these strategies, you can always opt for a business loan.
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Liquidate Old Inventory
While managing your business inventory you need to make sure that the inventory you’re buying is actually selling. Also, you need to carefully consider which products are selling well and which of them are having a hard time turning over. If you have any old inventory that you’re having a hard time getting rid of, consider liquidating those items as soon as possible.
Revaluate Operating Expenses
Managing cash flow isn’t just bringing more cash into your business. It is equally important to keep a track and reduce the cash going out of your business.
Here are five tips to reduce your business’s operating expenses and manage your money.
Cut out Unnecessary Expenses:
You need to carefully consider your current expenses and cut out any unnecessary expenses that will help you in managing your cash flow and expenses effectively.
Streamline Your Business Processes:
Focus on the cutting time, costs and analyze all of your current business processes by finding a way to speed up the process.
Purchase More Efficient Equipment:
Purchasing better equipment and updated technology will save time, which cuts back on the wage expenses and increases production or the ability to take on extra projects.
Ask Suppliers for Bulk Inventory Rates:
Some vendors offer discounts for buying inventory in bulk. So, you can ask your suppliers if they have any deals.
Consider Leasing Equipment:
If you don’t have the cash to flat-out buy equipment or you don’t qualify for a working capital loan, you can consider leasing equipment and gain lower monthly payments to help keep your cash flow in check.
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