Fifteen insightful tips to improve your business cash flow

One of the most important factors for the health of any business is cash flow. You need money coming in and you need to be able to spend the money going out so that you can keep things moving seamlessly.

Without a healthy business cash flow, you cannot invest in your business and therefore you cannot invest in upgrading it. Putting money back into your business as you earn it is the usual thing to do, but if your access to cash is limited, you might have trouble with even the most basic of expenses.

You have people to pay, you have rent to pay, and you have bills to pay. Not to mention the cost of providing the service or product that you are hoping to provide. Understanding your cash flow and putting it through a comprehensive analysis can help you to get your cash flow back on track.

A cash flow analysis will identify every single cent and dollar that flows in and out of your business. You can hire an outsourced and dedicated bookkeeper or accountant for your specific business industry and you have to remember that you still have to pay for that service.

Every single thing that your business has will cost you money, and your cash flow has to be in the positive as much as possible so that you can remain solid and stable. Most small business owners want to handle their cash flow analysis themselves, but it always pays off to have somebody to help.

There are plenty of good accounting software programs out there, because while you may outsource your accounting, that doesn't mean you don't have to learn about it.

Before you do anything else, you need to figure out the total cash flow of your business at the start of the period for which you're calculating. This means that you need both the inflow and the outflow, and you should separate them into the necessary categories.  

●      Inflow includes everything to do with sales and receivables, where outflow will involve inventory, payroll and other operating expenses, for example, rent, utilities and supplier payments that we discussed earlier.

●      If you are investing in any assets that are unnecessary for daily operation, you also need to make sure that you have a separate category for this. This can include anything from investment securities and real estate to equipment.

●      Another category you should really include is financing activities for dividends to stockholders or buying back any shares.

We're not trying to put a figure or a number in mind, but we're trying to learn from exactly how your cash flow is moving. So with that in mind, we've got some insightful tips to help you to improve your business cash flow.

1. Start with a comparative cash flow analysis. You know that you need to track every single thing that goes in and out of your business. In terms of finances, this will involve looking at multiple statements over time because one single statement is not going to give you the whole picture. You should consider things such as seasonal fluctuations and any external events that you invest in.

There are also things that you have to consider, such as diseases and pandemics that you can't control but that may impact your business. For example, artificial intelligence is making waves and while it might be something that you like the look of, if it's going to put you out of business, is it really a good thing?

How would AI impact your cash flow? How would a pandemic impact your cash flow? You have to know these things so that you can plan.

2. Start planning ahead. Cash flow in and out of your business should never take you by surprise. Problems with your cash flow could hit you very hard, and you need to be prepared. It's true that you can't always prepare for things to go wrong, but that doesn't mean you can't prepare in general. You can do this by managing your spending and looking for cash discounts for your business.

You should also avoid any late fees and build up any debt that is unnecessary. If you want to ensure that you don't spend too much money on your products or equipment, then you should track your inventory so you are only ordering what you need in appropriate quantities. The last thing that you need is to have a whole load of equipment and inventory that you cannot offload.

3. Take down your spending. You might think that the best thing that you can do for your business is to spend a bunch of money and upgrade things one by one. And while that's true, it's not going to help you if what you are spending is going to cost you in the long run.

For example, you can make your business far more energy or fuel efficient when you.Reduce your spending and this is going to be a good thing in the long term. You can talk to your suppliers and negotiate better terms, and you can also evaluate your staffing policies to determine whether or not you are happy with the way your staff are at the moment.

You might decide to reduce your staff so that you can ensure that you are only paying for the people that you need.

4. Make sure that you back yourself up. One of the best ways to ensure that you backed yourself up as a business owner is to build up an emergency cash reserve that your business can rely on. You never know when you may need extra cash, and having an emergency fund just like you would at home is smart.

Put aside a certain amount of money each month for such scenarios like economic downturn or unexpected disasters. You may not live somewhere that has earthquakes, but we can never really predict how the world is going to behave.

5. Bill your customers promptly. When it comes to efficiency, you need to ensure that you are billing your customers clearly and promptly with the payment due date and any penalties for late payments. You should also ensure that you are following up on those late payment penalties because you don't want to be considered as somebody who doesn't stick to their word.

6. Work on managing your profit and loss. By analyzing all of your expenses that are associated with running your business, you can be more aware of how much each expense is contributing to your cash flow.

The more you know what your profits are doing, the better you can manage your cash flow and over time this is going to help you. Managing your profit and your loss will help you to determine where you can pivot and make changes as necessary.

7. Focus on low cost marketing. One of the biggest things that your business needs is good marketing strategies so that people know who you are and know where to buy the best. If your marketing budget is too high, you could be costing yourself a lot of money over time and that's not gonna help you.

With email and social media marketing, you'll be able to spend less money than you would with paid advertising. Other strategies that you could use include optimizing your website and ensuring that your business is listed on the map listings and online directories.

8. Lease the equipment that you are able to lease. Instead of buying new equipment and upgrading it all the time, it could benefit your cash flow to lease rather than buy. For example, if you know that in a year's time a new model of the equipment that you like is going to be released, then leasing the equipment before then is smart.

9. Raise your prices if necessary. If you haven't raised your prices or your rates recently, you might be overdue for an increase. More businesses than ever would consider raising their prices every couple of years, but make sure that you are doing a customer analysis before you do that.

If raising your prices is going to chase your customers away, probably wait. If raising your prices is not going to change your customers away, lean into it.

10. Sell your excess inventory. A good way to improve your business cash flow is to sell your excess and unused inventory and equipment. If you know that you have equipment that's not likely to sell to customers, then you need to ensure that you are selling it in bulk or at auctions so that you get some of your money recouped.You don't need any of this equipment to sit around taking up space.

Being effective in your methods for improving your cash flow is important. There are plenty of financing solutions out there that can give you insight into what your cash flow looks like and what it could look like if you paid attention to it..