Tips for Small Business Cash-Flow Management
Owning a business can sometimes feel like a balancing act. One month everything is running smoothly, and the next you're waiting on invoices to be paid while bills keep arriving.
Managing small business cash flow is one of the biggest challenges many business owners face, regardless of how successful the business appears from the outside. Fortunately, a few simple habits can make a big difference.
At The Rosamond Financial Group, one of our personalized financial planning services is helping you manage your cash flow effectively. Let's look at some strategies to help.
1. Raise Your Prices
This first one’s a no-brainer. Among other small business financial problems, I’ve noticed business owners often find it frightening to raise their prices because they’re afraid it could result in lower sales. However, it’s okay to test several price points to find the perfect number. There’s no way to tell how high your customers are willing to go until you try.
2. Pay Digitally
All business owners have bills to pay. If you pay them digitally, you can wait until the morning of the day your bill is due to make a payment, increasing your cash flow.
Another digital option is using a business credit card. Some credit card companies offer a 21-day grace period, so you could pay your bills when they’re due and then take advantage of the grace period to improve your cash flow.
3. Perform Credit Checks on Customers
Run a credit check on any customer who doesn’t want to pay you in cash. If a customer has bad credit, you can assume you won’t be receiving payments on time. Even if you really want to close the deal, your company’s cash flow could suffer from the late payments.
4. Lease Equipment and Supplies
Most business owners know buying is cheaper than leasing. So this tip might seem counterintuitive. But to improve small business cash flow, leasing is better than buying because the smaller payments help free up cash. And unless your company is flush with cash, you’ll want to sustain a steady cash stream for daily operations.
5. Put Your Money in High-Yield Savings Accounts
The best high-yield savings accounts offer interest rates which are significantly higher than the national average, meaning you’ll earn more on the money you’ve stashed away. This can provide your company with cash liquidity.
6. Refine Your Inventory
Make a list of the stock you buy that isn’t moving at the same pace as your other products. Those sluggish products tie up a lot of cash and could reduce your cash flow. So instead of buying more of what doesn’t sell, get rid of what you do have. Increased demand for the product isn’t likely—and increasing your cash flow is a smarter move.
7. Give Early Payment Discounts
Everyone enjoys a good incentive, so by giving your clients a discount for paying their bills on time, you’re offering an opportunity for both of you to win. And, of course, receiving the payment early improves your cash flow.
8. Submit Invoices Right Away
In addition to sending out invoices immediately, your invoices should have clear terms and be simple to read. The due date should be mentioned several times (ideally in bold). Also, give precise instructions about the allowed payment methods and late-payment fees. Remember, the bottom line is to increase your cash flow, and sending out timely, no-nonsense invoices is a pivotal step.
9. Set Up Discounts With Your Suppliers
You’ll be in a better position to negotiate payment terms with suppliers if you maintain an ongoing, friendly relationship. If your suppliers are willing, pay your bills early in exchange for a discount. Setting up favorable arrangements with your suppliers is a key part of small business cash flow improvement.
10. Consider Creating a Buying Cooperative
You could take your negotiation skills to the next level by partnering with other like-minded companies willing to pool their cash as leverage for bartering lower prices with suppliers. Some suppliers give large discounts to firms who buy in bulk.
Strengthen Your Small Business Cash Flow
Every business is different, which is why there's no single solution for improving small business cash flow. At The Rosamond Financial Group, we take the time to understand your business, your goals, and the challenges you're facing so we can create the right strategy for you.
If you're ready to take the next step, I'd be happy to start the conversation. Call my office at 830-798-9400 or email solutions@rosamondfinancialgroup.com.
About Preston
Preston Rosamond is a wealth manager and the founder of The Rosamond Financial Group Wealth Management, LLC with over two decades of industry experience. He provides comprehensive wealth management and financial services to successful business owners, corporate executives, and affluent retirees who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch, a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing solutions@rosamondfinancialgroup.com or schedule a call on his online calendar.