According to an article by Michael Flint entitled “Cash Flow: The Reason 82% of Business…
Revisit and Fine-Tune Pricing
If you’re looking to increase cash flow for your business, one area you may need to hone in on is pricing. Many business owners get apprehensive about raising prices due to the fear it could adversely impact their sales. However, if you don’t test out different configurations and price points, you run the risk of underselling your products or services.
If your prices are too low, consumers may perceive you to be of low value and not take you seriously. On the other hand, if your prices are too far above fair market value, consumers will look elsewhere. As a result, the goal is to find a happy balance between the two that serves to maximize cash flow without sacrificing sales.
Extend Payment Options
Another way to help improve cash flow for small businesses is to expedite the process by which you get paid. As an example, you could extend payment options to include credit cards, debit cards, mobile payment options such as PayPal, or even enlist Bitcoin.
Employing an electronic payment system not only adds to customer convenience but also enhances the efficiency of payment processing. This additional option also serves to buy you time when it comes to outflows as it allows you to pay bills the morning which they are due. Automated e-mail reminders and simply picking up the phone are two other tactics that can also be conducive to the cause.
Adjust Your Payment Terms
For many businesses, invoicing can be a tedious process that involves a lot of back and forth. If you find that your clients are consistently lagging behind in thier payments, it may be time for you to implement an incentive and penalty program.
For example, you could offer discounts to all accounts that pay early or on time, and apply interest penalties to accounts that are too far in arrears. These adjustments will entice customers to pay quicker which will lead to immediate improvement in cash inflows.
Another tactic to consider, is to match your receivables to your payables. This essentially entails looking at supplier payment terms and comparing them to the terms you have set up for your customers. If your suppliers require payment in 30 days, and you allow your customers to pay in 60 days, a gap in cash flow manifests. Matching terms would be an ideal way to bridge this gap.
Consider Leasing Over Buying
Since leasing equipment, supplies, and real estate is oftentimes more expensive than owning outright, it may seem counterintuitive to employ this track. However, unless your business is flush with funds, it would be ideal to seek ways to optimize cash flow streams for purposes of covering day to day operational expenses.
By paying in small increments through a leasing arrangement, you can work to boost the cash flow of your business. An added incentive is that lease payments are considered business expenses and can thereby be written off. Leasing technology devices also allows you to more easily stay up to date with the latest innovations and advancements.
Improve Your Marketing Efforts
Any improvements that you can make to your marketing methods will ultimately have a positive effect on your company’s cash flow. Improved marketing and advertising strategies can lead to a lower cost-per-lead, boost conversion rates, and add to the lifetime value of your customer.
In today’s technologically advanced data-driven environment, utilizing the traditional means of reaching your target market are simply not enough anymore. Consider employing a more multi-faceted approach with an emphasis on online touchpoints. Digital media marketing can be just as important, if not more important, than traditional means.