Running a successful business? You’re probably already aware of the old adage “cashflow is king”. Sounds cliche, but like most well-worn phrases, there’s more than a kernel of truth to it. Even well-oiled enterprises can hit a wall if they don’t manage their financial lifeblood efficiently. Whether you’re a start-up gunning for fast growth or a seasoned operator facing a fiscal bottleneck, these five hacks can help you break the dam and get that sweet moolah flowing.
1. Explore Flexible Funding Options
Even the most well-run businesses can sometimes ram headlong into a temporary cash crisis. Strategic financing can be a lifeline if you know how to utilise it cleverly. External funding can be a welcome source of cash flow loans for businesses dealing with a short-term shortfall. These loans can provide access to the funds you need to cover payroll, purchase inventory, or invest in growth. Unlike conventional business finance from banks and other institutional lenders fast cashflow loans from small business lenders are designed to help you over the speed bump with a smaller, quick injection of cash based on your company’s revenue. Most lenders provide fast, flexible packages with minimal paperwork and no credit checks within 24 hours. A word of warning: Be sure to check the interest rates and repayment terms as well as the fine print. Get stuck with a loan you can’t afford to pay back, and you’ll soon be in a world of pain.
2. Get Strict About Invoicing
Slow-paying customers can put a serious dent in your cash flow. The antidote to this pecuniary poison is to make your invoicing policies and processes as efficient and effective as you can. Always be sure to invoice immediately upon completion of work or product delivery. If you’re providing service on a retainer model, use your accounting software to create automated invoices that reach the client on the same date every month. Automated payment reminders and even late fees will keep those recalcitrant payers on their toes. Of course, you catch more bees with honey, so another option is to offer small discounts for early payments. These can incentivize your customers, rather than penalising them. Always a more pleasant option.
3. Cut Unnecessary Costs
On the other side of the ledger, regular expense reviews boost your cash flow by ensuring more of it stays in your account. Analyze your overheads, subscriptions, utilities, supplier contracts and day-to-day office expenses to get a handle on what’s truly necessary and what can be relegated to the financial trash can. Even when expenses are necessary, perhaps you can renegotiate more advantageous deals with service providers or suppliers? Loyalty is great, but if it’s costing you thousands, it may make more sense to switch to more cost-effective suppliers. Trimming financial fat doesn’t mean skimping on quality; Think of it as Zen for business: an exercise in mindfulness regarding every dollar you spend.
4. Create a Cashflow Forecast
Flying blind is rarely a business strategy that delivers success. Cashflow forecast helps you predict your incomings and outgoings so you’re better prepared for economic ups and downs. If you’re a spreadsheet whiz, this is your time to shine. Map out the next six months of expected monthly revenue and expenditure, factoring in tax obligations, supplier payments, and ad-hoc costs like subscriptions, office and IT equipment, and others. Try to be as accurate as possible to give yourself the optimal level of control over your financial landscape.
5. Build a Buffer Fund
When business is humming, it’s tempting to reinvest that excess cash into the venture. However, savvy business owners know all too well the value of preparing for that unexpected curve in the road ahead. It makes good sense to set aside a defined percentage of your profits as a buffer fund to provide a safety net for unforeseen leaner months or economic slowdowns. Aim to accumulate a minimum of one to three months’ worth of operating expenses to weather whatever temporary storm may hit.
Final Thoughts
Managing cash flow is a never-ending task for every businessperson. Take proactive steps, such as strategic short-term loans, invoice streamlining, and effective cash flow planning, and you can stay ahead of the ebbs and flows. Being prepared will reduce your financial stress and give you the freedom to focus on what you do best: growing your business. With these five strategies in your business toolkit, you’re on your way to earning the rightful title of a true money maven.