I hope you enjoy this article by guest author Derek Goodman from Inbizability.com
It doesn’t matter what industry your business is in — if you don’t have money (i.e., cash flow), you can’t be successful. Cash flow essentially refers to the amount of cash that is flowing in or out of your company at any given time. And consistently dealing with cash flow problems will make it difficult to pay your bills, invest in your business, and move your business forward.
Though managing cash flow can be challenging, there are some simple strategies to make the process more efficient and less stressful. Fairway Business Advisors has listed a few of them below!
Form an LLC.
The business structure you operate under can play a major role in the health of your cash flow. Make sure your entity is working to your advantage. For instance, forming an LLC can help you save money and preserve your finances in the long term, thanks to tax benefits and liability protection.
Before you register your business, know this: LLC rules vary by state, so it’s important to check your state’s LLC guidelines beforehand. Failing to comply can leave you in legal hot water.
Hone in on your accounts receivable.
A lot of small businesses struggle to maintain steady cash flow because they are owed a significant amount of money from their customers or clients. If you’re dealing with unpaid accounts receivable, set out to collect them now.
Also, make sure you’re sending invoices promptly and giving your customers the option to pay electronically. And consider how you can encourage customers to pay their bills early, such as offering discounted rates.
Reduce costs and increase revenue.
One of the most practical ways to sustain healthy cash flow is to minimize your costs and maximize your revenue. Revisit your business expenses, and cut any that are completely unnecessary. For example, do you really need those magazine subscriptions for your waiting room or will your customers get along just fine without them?
Another way to reduce costs is to renegotiate terms with your suppliers. The key here is to develop and maintain a good rapport with each supplier. Once the relationship is established, ask your suppliers about getting discounts for buying in bulk, partnering with other businesses on large purchases, and/or paying for products early. If you find that you’re paying your suppliers too much and they are unwilling to work with you, it might be time to look for new suppliers!
Furthermore, strategize how you can increase revenue. Think of promotions and discounts you could offer to boost sales. Brainstorm new products or services you could bring to the table. And think of cost-effective marketing strategies that could help get your brand in front of new audiences.
Consider leasing equipment.
Finally, making big purchases on equipment can prove problematic when you don’t have steady cash flow. An alternative is to lease any equipment you need for maximizing efficiency in your operations. That way, you won’t have to deal with a large lump sum that puts your cash flow at risk.
Just make sure that you have the money to cover the lease payments. While leasing typically doesn’t impact your cash flow as much in the short term, failure to make payments can cause issues down the road.
Maintaining healthy cash flow for your small business may not be the easiest task in front of you, but it is certainly one of the most essential. Remember to evaluate your business structure and change it if necessary. Start collecting any unpaid receivables, and find ways to reduce expenses and boost revenue. Lastly, explore the idea of leasing new equipment to help you keep more cash on hand.
Fairway Business Advisors provides strategic growth planning, leadership coaching, financial analysis, and many other services for small businesses. To learn more about how we can help your business, please give us a call at (319) 389-9316.