If you’re a small business owner, you’re well aware of the importance of keeping your cash flow healthy. Unfortunately, this can be tough in today’s economy. In fact, in a survey by Upswell Marketing in 2021, 97% of small business owners said rising cost was the biggest challenge they faced in the year, and they expect even more increases in 2022. The higher the cost of goods and operations, the narrower the revenues become.
So what can a small business owner do to improve cash flow and stay afloat? We’ve compiled a list of 11 tried-and-tested ways to do just that.
How To Increase Cash Flow: Strategies for Small Business Owners
There are many different ways to improve small business cash flow in the coming year. Here are 11 of the most impactful techniques.
1. Review your expenses regularly.
The first step to improving your cash flow is getting a handle on where your money is going. Review your expenses on a regular basis — at least monthly, if not weekly. Are there any areas where you’re spending more than you need to? Are there any recurring costs that could be eliminated or streamlined? For example, if you’re still using paper invoices, switch to an online system to save on printing and postage costs.
2. Keep track of inventory.
It’s important to know how much inventory you have on hand at all times so you can avoid over-ordering (and tying up too much cash in inventory) or under-ordering (and losing out on sales). If possible, invest in inventory management software to help you keep track of what you have in stock and how much it’s costing you.
3. Offer discounts for early payment.
One way to encourage customers to pay their invoices more quickly is to offer a discount for early payment. For example, you could offer a 2% discount if the invoice is paid within 10 days. Just be sure to include the terms of the discount on the invoice, so there are no surprises.
4. Take advantage of credit cards.
If your customers typically pay with credit cards, you can use a service like Square or Stripe to process payments and get your money right away — minus a small processing fee. This can be a great way to improve your cash flow if you’re expecting a large influx of sales (like during the holiday season).
5. Get a business line of credit.
Another option for improving your cash flow is to get a business line of credit from a bank or other lender. This can be helpful if you have unexpected expenses or need to make a large purchase and don’t have the cash on hand. Just be sure to only borrow what you need and make payments on time to avoid getting into debt.
6. Use accounting software.
Accounting software can help you keep track of your income and expenses, which is essential for healthy cash flow. There are many different options available, so choose one that fits your needs and budget. QuickBooks and FreshBooks are two popular choices.
7. Stay on top of invoicing.
One of the biggest mistakes small business owners make is not invoicing customers promptly. This can lead to late payments and cash flow problems. To avoid this, set up a system for invoicing customers as soon as the work is completed (or at least within 24 hours). This way, you’ll get paid more quickly.
8. Offer payment plans.
If you’re selling products or services that are expensive, consider offering payment plans to help customers afford them. For example, you could offer a three-month payment plan for a $1,000 product.
9. Keep your bank account healthy.
It’s important to keep your business’s bank account in good standing so you can avoid fees and maintain a positive relationship with your bank. This means making sure there is enough money in the account to cover any fees (like monthly maintenance fees or overdraft fees) and making deposits and withdrawals on a regular basis.
10. Review your pricing.
If you’re not happy with your current cash flow, it may be time to review your pricing. Are you charging enough for your products and services? If not, consider raising your prices. You may be surprised how much of an impact a small price increase can have on your bottom line.
11. Get a fixed rate business loan.
A fixed rate business loan is a type of financing that allows you to borrow money for your business at a fixed interest rate. LendThrive offers competitive rates for small business loans, which can help you improve your cash flow.
You might need the money to make improvements and implement new systems that will boost efficiency and set aside more money flowing into your reserves.
Improve your small business cash flow with LendThrive. Whether you’re enhancing your processes or adding new products or services to improve your bottom line and increase revenue, a fixed rate business loan from LendThrive can help. Contact us today for more inquiries or apply for a loan directly and get as much as $150,000 within 24 hours.