5 Steps to Boosting Your Cash Flow
It may be simple economics, but it’s worth repeating: no business will survive if it’s spitting out more cash than it’s bringing in. That’s why every business owner should map out a cash-flow strategy and be diligent about following it, especially in these troubled economic times. Here are some easy tactics involving minimal investment to help keep your business in the black.
1. START WITH A PLAN If you don’t already have one, do a cash-flow projection. Jane Sawyer, lead business development specialist of the U.S. Small Business Administration, recommends mapping out your overhead and tracking your revenues in order to anticipate peaks and valleys. After all, the only way to determine where you need to go is by understanding where you are.
2. TAKE PAPER AND PLASTIC Many small businesses don’t accept credit cards because the processing equipment is so expensive. While it still costs a little, setting up a merchant account with an online service can be a much cheaper alternative that will pay off in the long run.
3. KEEP IT MOVING “Inventory management is one area that is really overlooked,” says Sawyer. “Keep an eye on what’s selling best, but also look at how to get money for stuff that isn’t moving.” Sawyer suggests offering discounts or special promotions to move slower selling goods.
4. GET PAID FASTER It’s easy to fall behind on your invoicing, but there’s no reason not to be diligent about it. As soon as you’ve done the work, get the invoice out. The quicker you invoice, the sooner you’ll be paid. Also, when negotiating contracts, arrange for incremental billing, so you’re paid at the beginning, middle and completion of services rendered.
5. DECREASE THE OUTFLOW Part of increasing your cash inflow is decreasing the amount going out. Sawyer suggests setting up payment plans with your vendors, shortening your business hours, turning off the air conditioner and reducing staff hours where possible. “It may seem minute, but over the course of the year, the savings will add up.”