Keeping your business afloat and moving forward often largely depends on the amount of cash flow you have on hand at any given time. If cash flow dries up, operations tend to freeze up as well.
There can be many reasons why you might encounter a dry spell when it comes to cash flow. It could be seasonal, an increase in competition, invoices not being paid on time, a gap between expenses and getting a return, and a whole host of other reasons.
Let’s take a look at some top tips for increasing your business cash flow to prevent operations stalling or going backwards.
Lease equipment instead of buying it
One key way to keep cash flow higher is to lease business equipment rather than handing over lump sums of cash all at once to purchase something outright. Another upside of a lease is the option to purchase the equipment or upgrade the equipment to the latest and greatest, at the end of the lease. Equipment leasing is also becoming increasingly popular and supported by a variety of finance providers including private lenders and fintech.
Stay on top of your invoices
It’s critical to bill clients as soon as possible to support a regular cash flow stream.
It’s also important to stay on top of your invoices to make certain they are paid on time, as well as to chase up clients who are tardy when paying. While time-consuming, this is an essential business function. If you don’t have the scope to do this, be sure to assign this task to your bookkeeper, accountant, staff member, or even a virtual assistant. Keep in mind though, that getting people to pay their bills on time requires a certain skill and diplomacy – so be sure to assign the task to the person best suited to the job.
Another idea is to offer discounts to customers that pay their invoices before the due date. This can be a great incentive for clients to pay ahead of schedule and in turn, support a more steady cash flow for your business.
Short term business loans
A business loan is one way of obtaining that extra money you need when you need it. You might just want to boost your cash reserves, need the money to cover the cost of a lucrative new contract, or you wish to use the funds to expand your business.
The good news is that there are numerous finance providers, including private lenders and fintech, that provide business loans in Australia. In particular, there’s an increasing demand for short term finance providers who offer business loans for 3 – 12 months.
When it comes to short term business loans, an online application is generally the norm which makes the process more simplified, streamlined and quicker.
Be aware of and trim back spending
Unless you’re diligent in your accounting and are keeping tabs on everything you spend in your business, you could be leaking money without even being fully aware of it – especially as some purchases may seem small and insignificant, but can add up to a quite a lot of money over a period of time.
It’s also wise to have a formal framework in place that records and allocates all business spending to ensure the purchase is a legitimate, and warranted business expense. This should also be checked and reconciled regularly.
Bring in an investor
Bringing in an investor might not be what you want to do, but a percentage of something may be better than 100% of nothing. If your business is up against it and you fear it’s not going to survive, then a cash injection from an investor can prove to be a lifesaver.
The key takeaway
There are numerous ways you can improve cash flow for your business. It’s a good idea to know what options are available to you, as well as set in place ‘best practice’ measures that help you to stay on top of your business finances.