12 Proven Tips to Improve Your Business Cash Flow
If you are hard-pressed to find money to pay your suppliers, manage daily expenses, and finance initiatives to grow your business, you must read a few effective tips to improve your business cash flow. These will assist you reverse the situation to positive cash flow and eliminate worries.
It is natural for you to be stressed when earnings are lower than business expenses. A number of reasons can contribute to it this, such as a demand shortage, debts, or lower sales due to increased competition.
It could also be because you messed up your cash flow forecasting and budgeting. Cash flow management that has gone south can also lead to a shortage of liquid cash. Whatever the case, you have to take firm action and find your footing as fast as possible. A third-party provider of accounting services Singapore can also help you streamline your cash flow.
Here are key crucial tips to improve your business’ cash flow to make it profitable, achieve targets, and have extra liquid cash in your hands.
Practical Tips to Improve Your Business Cash Flow
1 Install Reliable Invoicing Process
Speedy Payments
You may need to improve your invoicing process for faster recovery of dues. Be consistent and prompt in sending accurate invoices to customers.
You may also need to mention payment terms clearly on the invoices. It helps eliminate payment disputes or delays. Be prompt and clear to avoid late payments.
Eliminate Errors in Invoicing
Improve your invoicing by eliminating errors, typos, and discrepancies in invoices. Be accurate about purchase dates, items bought, quantity, rates, taxes, and payment. A confused customer asks for an explanation or gets into disputes, which delays payment. And your cash flow gets stuck.
Get Visibility into Your Invoices
To recover your dues, you first must know your outstanding invoices. One of the best tips to improve your business cash flow is to implement the latest accounting software. These tools help you gain visibility into your invoicing situation.
Using it, you can generate ageing payable and receivable report which will help you streamline your cash flow. It will also allow you to forecast, plan and manage future surpluses or shortfalls in cash flow in an effective way.
Updating Books Regularly
Promptly generating and sending invoices also helps you maintain your books up-to-date. Accounting software helps you digitise your transaction data and also gives you a peek into your business’ current financial health.
The reusable digitised financial data comes handy in generating informative financial statements and management reports. It is also useful for analysis, audits, and in planning investments. Your creditors and investors also insist on seeing it for making investment related decisions.
2 Negotiate with Suppliers for New Payment Terms
You can remedy your lower cash flow situation by negotiating new payment terms with your suppliers. Ask them to increase your credit period or accept payment in instalments. You can also ask for discounts or better prices.
Every penny saved will leave more cash in your hand.
Use the money in hands effectively and you will not need to borrow money or look for a loan. It will also make you free of financial worries and help you focus on your business activities.
3 Eliminate Unnecessary Expenses
One of the tips to improve your business cash flow is to eliminate unnecessary business expenses. It will leave more money in your hands for necessary expenses and to meet other financial obligations.
Monitoring and analysing your spending habits will give you a handle to locate unwanted and unproductive expenses. Cut back or eliminate them. Start rationing your money.
Spend consciously and stay within your means. See to it that every penny you spend contributes to the ROI or covers essential business expenses.
4 Hike Your Prices
You can increase prices to generate more income from your existing sales volume. You get to maximise profits while you investment remains the same.
This leaves more cash in your hand and enables you to effectively cover your operational overheads, salaries, and other financial obligations.
Hiking your prices allows you to mitigate lower cash flow situations satisfactorily and also makes available funds to grow and expand your business activities.
5 Prepare Cash Flow Forecasts
Cash flow forecasting relies on past data and trends to make predictions about future earnings and expenses. It enables you to understand the increase and decrease you may experience in your cash flow.
Anticipating your cash flow allows you to prepare for the threats posed by cash shortages or the opportunities you can cash on using the surplus cash. It allows you to prioritise business expenses, find funds, take steps to increase sales or send reminders for the due payments to customers.
It also helps you set viable goals and resource allocations and optimise your cash flow.
6 Manage Your Inventory Efficiently
The inventory lock up a huge amount of your capital. It is why you have to optimise your inventory and maintain the right amount of stock for every occasion.
Avoiding overstocking helps release the extra cash locked up in inventory. On the other hand, it also prevents under-stocking and loss of potential sales.
Forecasting demand enables you to track stock movements and exert strict control over inventory.
7 Search for More Financing Options
Having access to alternate sources of finance helps, especially when you experience negative cash flow. Access to additional sources of finance simplifies your expenses, like salaries, growth initiatives, and supplier payments.
Exploring alternate finance options or lines of credit enables you in preparing for the worst situation and overcome financial crunch.
8 Exploiting Invoice Financing
Invoice financing lets you access funds using unpaid invoices. This option lets you sell your unpaid invoices to an interested invoice financing firm. You don’t get all the money stuck in your invoices but get access to a part of the invoice value.
The invoice finance firm then takes charge of follow-up, reminders for due payment, and payment collection from your customer. It fulfils your immediate cash requirement and helps you pay your liabilities.
After your customer pays the due invoices, the invoice financing firm pays you the balance, if any. They get a percentage of the total invoice value or a flat fee, which depends on the time your customer takes to pay the dues.
9 Sell Subscription-based Services
If your business model allows, providing subscription-based services gives you a dependable and regular source of income. You get to charge your customers monthly or annually. This recurring and stable source of earning helps stabilise your finances and plan for business growth.
Moreover, you get to enjoy customer loyalty, low customer churn rate and minimal costs for new customer acquisition. Retaining existing customers and attracting new ones gives you a stable cash flow.
10 Implement the Latest Accounting Software
Implementing the latest technology comes in handy in managing your cash flow effectively. They provide better visibility in your finances and aid in data-driven decision-making.
Accounting software helps you keep an eye on account receivables, pay liabilities, and stick to budgeted expenses. You also get access to mobile apps for real-time accounting and deep financial insights. The latest technologies and online payment platforms simplify mobile deposits, monitoring of expenses, inventory tracking, and scheduling.
11 Managing Cash Flow for Your Growing Business
A growing business needs all the cash it can get. Cash flow management allows you to fund its growth in an efficient manner. It enables you manage the increased demand for liquid capital, resource funding, and debt and liability management.
Tracking cash cycles, efficient debt and supplier payment management, and improving internal procedures and processes help. These allow you to finance the growth spurt of your company.
12 Hire an Experienced Accounting Service Provider
The best accounting services Singapore update and maintain your books of accounts. Their expert accountants provide accurate and deep financial insights through timely cash flow statements.
They analyse your transaction data to reveal cash flow trends. They prepare cash flow projections and assist you in anticipating potential financial troubles. Their insights help you in making informed business decisions.
Here is the best of all tips to improve your business cash flow and help it succeed. A reliable accounting services firm such as SBS Consulting, assists you in claiming tax deductions, efficient tax planning, prompt invoicing, and achieving positive cash flow.
Contact us at +65-6536 0036 or email us at info@sbsgroup.com.sg to get answers to your cash flow management-related questions.
Also Read: How difficult to file corporate tax
