7 Ways to Improve Cash Flow in Your Business
You’re a business owner, and you know how important it is to keep on top of cash flow, but you also know that it’s not always easy…
In this article, you’ll discover 7 ways to improve cash flow in your business to help avoid the dreaded “cash flow crisis.”
Cash flow is also important because it can help indicate whether your business is doing well or not. If cash flow drops suddenly (and unexpectedly), then this could mean that there’s something wrong with either how much money is coming into the business or how much money you’re spending.
Here at Joanna Bookkeeping, we understand that your accounting goals are unique, that’s why we’ve carefully created a selection of accounting services for small and medium-sized businesses. When it comes to ways to improve cash flow, we’ve got your back!
Here are 7 ways to improve cash flow in your business:
1. Collect money from clients automatically
When you’re running a business, there are a lot of details to keep track of. It’s important to make sure you’re not missing anything because if you do, it can cost you time and money (and sometimes both).
That’s why it’s good practice when trying to improve cash flow to collect money from clients automatically. This can be by using Direct Debit or recurring payments on a card. There’s also a big chance that your clients will love an auotmated solution because for them it’s also one less thing to do. And if someone is strongly refusing, maybe you should consider whether they will be good at paying at all…
We have an article about GoCardless which offer automated collections that can give you even more insight into automatic payments.
2. Negotiate better payment terms with your suppliers
It’s important to be respectful here. Don’t approach any negotiations with your suppliers with a demanding attitude, remember, the arrangement has to be beneficial for both parties. If you’re not careful, you may ruin a good relationship with a supplier, and finding a new one may end up costing you time, stress, and even money.
An example of negotiations may involve agreeing to longer-term payment terms. The key is to always be respectful of your suppliers, so don’t talk only about what you need for yourself. Your suppliers have needs as well. We all do.
3. Include bank details on your invoices or a payment link
When making efforts to improve cash flow, make sure to include bank details on your invoices or a payment link, either of which will enable customers to pay quickly and easily.
A lack of bank details on your invoices might slow customers down when it comes to paying. Unfortunately, we come across this quite often. You want to make sure you have all crucial elements on your sales invoices.
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4. Plan your payments to suppliers
When you make payments to your suppliers matter for your cash flow.
❌Don’t pay a supplier as soon as an invoice arrives unless payment terms are due on receipt.
✅Try to pay closer to the deadlines making sure money from your clients come into your account first, so you don’t have to use your overdraft or credit from the bank.
Making payments on time is important for building strong relationships with suppliers and keeping them happy. However, if your cash flow isn’t good enough to cover your costs, then paying suppliers just before the deadline may be necessary. And if you’re seriously struggling, try talking to your suppliers. There’s nothing worse for your relationship than just going completely quiet.
5. Use invoicing software and automation
Invoice clients straight away – If you completed your service, don’t wait for ages to invoice clients.
The easiest way to start automating your invoicing is by using software with built-in features that can help you manage and improve cash flow.
Invoicing software will allow you to send out invoices quickly and easily, which means less time spent on manual data entry and more time spent selling your products or services. You’ll be able to see what invoices need to be sent out or resent, who hasn’t paid yet, who hasn’t responded yet (and so on). Xero accounting software offers this feature!
An invoice management system not only has standard features like billing reminders but may also have other innovative tools such as online payment options where customers can pay using their bank card or bank account directly through the platform rather than sending an invoice via email/postal mail each month which could result in lost revenue due to forgetfulness etc.
You can even set up recurring invoices if a service you provide is repetitive. This way you don’t have to remember to send the invoices out, accounting software like Xero can do it for you automatically. And if you’re intrigued by automation, you can automate even more in Xero.
6. Listen to your customer's preferences in terms of payment options
Listen to your customers’ preferences. Some customers will want to pay by card, others by bank transfer, etc.
If your clients don’t like paying by bank transfer because it makes things more difficult for them and they would prefer to pay on the card, for example, consider implementing additional payment options or get rid of one option and implement a different one. But don’t jump into implementing various solutions only because one or two clients mentioned they would prefer something different. It has to make sense for the majority of your clients. You can’t offer all types of payment options that exist in the world only because one person wants them.
In some cases you will have to incur additional fees, but overall, you will have more money in your bank account because you will minimise late payments or no payments at all. Try to look at the bigger picture not at the fees in isolation to the rest of the business.
7. Monitor your costs
As a business owner, it’s your job to make sure you’re spending money wisely. You need to spend in ways that will improve your company and help it grow. You also need to do everything possible not to waste money on things that won’t make you any money or even lose you money. The key is monitoring your costs so that they don’t get away from you.
It’s important to note that some costs have to increase in order for your income to increase, or for your level of service or quality of goods to improve, so not every cost increase is always a bad thing. Again, look at the bigger picture here and deal with those cost increases that are negatively affecting the business as a whole. Using accounting software to do your bookkeeping can help with monitoring everything.
As you can see, there are many ways to improve cash flow in your business, and you can save time and money by putting these tips into action. We hope that this article has given you some helpful ideas for improving your cash flow management so that you can focus on what really matters: running a successful business!
Why not get in touch with our professional Oxford accounting team today to see how they can help you and your business achieve its potential.
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