If you own a small business, then you know that cash flow is the lifeblood that keeps a business afloat. But, here’s a catch. It can also be a business downfall if not managed well.
A cash flow, if left unchecked, can cause any business to flounder and eventually sink. As cited in Forbes, based on a study by Jessie Hagen of the U.S. bank, 82% of businesses fail because of poor cash flow management. So, what can you do to help your small business escape from this statistic? Make sure to follow the different cash flow management tips outlined below.
Tips to Manage and Improve Your Small Business Cash Flow
Immediate and Automated Sending of Invoices
Invoicing is a critical part of cash flow management to increase cash flow for a business. The ability to generate and send invoices quickly and easily can make a big difference in the overall health of your business.
First, it saves you time. You won’t have to manually create and send each invoice, which can be time-consuming. Second, it increases accuracy. With an automated system, you can be sure that each invoice is accurate and includes all the necessary information. Third, it improves communication with your customers. Customers will receive their invoices immediately after purchase, which will help them keep track of what they owe you. Finally, automating your invoicing process can help you get paid faster and more promptly.
Take an Inventory Check
Regular inventory checks can help you stay on top of your stock levels and ensure you’re not tying up too much cash in unsold products that could hurt your cash flow. Likewise, rather than purchasing more of what doesn’t sell, it’d be wise to get rid of it even if you must sell it at a reduced price. Sometimes it’s tempting to keep products on your shelves, thinking they will be profitable one day, but if you want to make an extra income for your small business, you need to set aside your feelings and be objective with your inventory.
Have an Emergency Fund
No business owner can predict when their next financial emergency will strike, so it’s always worth having an emergency fund available. When an unexpected expense crops up, having enough cash from your emergency fund to cover it can save you a lot of stress and hassle.
Cut Costs
Take a close look at your operating expenses and see where you can cut back. Every business has areas where they can save money, so look for ways to trim the fat from your budget. For example, you can cut costs in your small business by streamlining your operational process or negotiating better deals with your suppliers.
Increase Pricing
One option to improve cash flow is to increase the pricing of your goods or services. But, as a business owner, this can be a difficult decision as you don’t want to price yourself out of the market or lose customers. However, it’s also important to experiment with pricing to find the ideal number.
Here are a few tips on how to increase pricing without losing business:
- Do your research: Know what your competitors are charging and make sure your prices align with the market.
- Communicate with your customers: Let them know ahead of time that prices will be increasing and why. It will help them understand and accept the price changes.
- Be flexible: Offer discounts to customers who commit to longer-term contracts or higher volume purchases.
Use the Best Tools
Most business owners face many challenges in their cash flow because they often lack the resources needed to make informed decisions about managing their finances. By utilizing helpful financial tools like Moolahmore, you can track your cash flow accurately, manage cash flow better and create more effective choices for your business needs.
Conclusion
Your cash flow can either make or break your business. Knowing how to manage and improve your cash flow is crucial to keeping your small business in the long run.
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