Healthy cash flow is essential to any business. It allows you to invest in new business opportunities and generate more revenue. It also helps you meet unexpected expenditures. For example, with strong cash flow, you can secure a loan that pays for vital repairs or replaces lost inventory.
A healthy cash flow position is especially important in a challenging climate where your small business is more vulnerable to issues such as low demand, staff turnover, and rising operational expenses. Here are a few ways to maintain positive cash flow in times of uncertainty:
Conduct a market survey to determine if you’ve set the ideal price. Consider raising prices for your bestselling products and services. If your rates are too low, you could be missing out on revenue and hurting your cash flow.
Lower Your Operational Expenses
Improve your cash flow by reducing your operational expenses. Make frugality a theme of your organization until the business climate improves.
Change the Way You Deal with Customers
It’s essential to conduct thorough background checks on new customers in an unpredictable business climate and avoid extending credit to customers with bad credit. If you must deal with less reliable customers, then ask for a deposit.
Send invoices out immediately. Incentivize timely payments with early payment bonuses and late-payment fees before those unpaid invoices pile up. Offer your customers electronic payment options to convert unpaid invoices into cash faster.
If possible, give breaks to loyal customers facing temporary setbacks by offering to split monthly payments into more manageable weekly sums.
However, don’t waste time if your debtor is going out of business. Act immediately to avoid writing off debt. Get professional help from a collection agency that can achieve results and preserve your standing in the business community. For example, a company like Summit A*R recovers debt without resorting to shady tactics. They treat debtors with dignity and respect yet have the highest recovery rates in the country.
Change the Way You Deal with Vendors
Pay your vendors on time. But avoid paying them early unless they offer early payment bonuses. Pay your bills on the final due date during slow months to have a more robust cash flow report.
Negotiate lower prices with older vendors if your purchase volume has grown. Form a buying group with other businesses to buy in larger quantities and earn bulk prices.
Try Remote Working
Allow employees to work remotely. Studies show that remote working improves productivity. Moreover, it reduces certain overheads, such as energy bills. A pleasant side effect is that it’s also good for the environment.
If your business has seamlessly shifted to remote working, then downsize your business to improve cash flow. Smaller office space will be cheaper to rent. If your business owns its office space, then consider renting out a portion to another business for a welcome boost to your books. Another advantage of downsizing is that your business can liquidate its obsolete inventory and assets to free up some useful cash.
With the right steps, your company can adapt to a changing business environment and improve its cash flow. This can help your business ride the storm and thrive in the future.