Six ways to boost your cash flow

Cash flow is a major determinant of success for both large and small businesses.

Cash flow refers to cash and cash equivalents flowing in and out of a business through its transactions.

Maintaining good cash flow calls for both skill and shrewdness. You need to be intentional when balancing the money changing hands in your business.

You need enough money to pay for day-to-day operations, as well as cater for external needs, such as paying suppliers, rent and settling other bills.

Both large and small businesses can suffer cash flow constrictions – no business is immune to cash shortages. To stay afloat, here are some tips that can help.

1. Improve your inventory

If not well managed, business inventory can hold up loads of cash, constraining operations.

Conduct regular stock reviews and be sure to get rid of dead stock by either selling it at lower prices or by reducing its intake.

Additionally, identify items that have a high turnover rate and maximise on them as this will release more cash through strong sales.

2. Form a buying co-operative

There’s plenty of bargaining power in numbers. Find like-minded business owners and form a buying co-operative that can lobby for cheaper prices from suppliers. This way, you enjoy the discounts big companies get.

Once suppliers offer you items at subsidised prices, you can then sell them on at lower prices, hence drawing more customers. The less cash you need for your inventory, the more you have available for other business requirements.

3. Offer discounts on debt

Use this tactic to collect what your clients owe you. Offer them lower re-payment rates and better terms if they pay their debts before the expiry of their grace periods.

The repayments can help boost cash flow. However, be careful when you offer discounts, and make sure what you’re offering is proportional to the value that you’ll get. Don’t run into losses in an attempt to recover money.

4. Don’t give credit blindly

If you want to maintain proper cash flow for your business, guard your crediting habits. Before lending or giving out goods or services on credit, ascertain the creditworthiness of your customers.

This will save you the hassle of recovering your money from debtors who already have a history of not paying their dues. You want to free as much cash as possible for your operations, so avoid both bad and doubtful debts.

5. Send invoices out immediately

Once you’ve delivered on your services or sold goods to a client, be sure to send out your invoice instantly. This immediately increases your chances of collecting your receivables faster.

Once the other party has received your invoice, they’ll feel obligated to begin making plans to pay you, or at the very least schedule you into their payment system as early as possible.

6. Have a system that works

Good cash flow is a result of a working business system. Make sure your operations are well co-ordinated to avoid misuse and misappropriation of funds.

Loosen things up in your business by creating smooth transitions with cash and general business operations. Keep a precise check on your financial records and transactions.

A business that’s badly managed cannot thrive, even with good cash flow. You’ll, therefore, need to be proactive to maintain a good flow of money that’ll sustain and help your business scale upwards.