Those who fail to monitor the inflow and outflow of capital in their businesses are more than likely to face money problems down the road. Cash flow is something you should be paying attention to from the very beginning—in terms of both improving it and consistently managing it.
Here are just a few cash flow strategies that could be helpful to small businesses:
Cut Costs—But Not Corners
The more money you save, the more your business has to work with. However, don’t just cut costs for the sake of cutting costs. Carefully assess how you’re currently spending money, and determine what areas could do without as much funds for the time being.
For example: You notice your sales haven’t significantly increased after launching your previous marketing campaign more than a year ago. It wouldn’t be the worst idea to dial back, re-evaluate your efforts, and make the proper adjustments. This way, you’ll have more money to utilize elsewhere during this period, and a more effective marketing campaign to implement when it’s all said and done.
Double Down on Inventory Management
Relating to our last point, review your inventory management processes and determine if there are ways to be more organized and cost-effective.
According to a 2014 article by Scanco, a supply chain automation software and services provider, businesses typically spend about 25 to 35 percent of their operational budgets on inventory each year. Mishandling such a large amount of funds could do a lot of damage. “In fact,” Scanco states, “research has proven that businesses with poor inventory management strategies spend higher than the average business on inventory costs, leading to smaller profits and greater chances for going bankrupt in the near future.”
Get a Merchant Cash Advance
It’s easier to run a business and manage positive cash flow when you have more capital to work with. One option to consider is merchant cash advance financing. An alternative to a small business loan, merchant cash advances (MCAs) give business owners the opportunity to “sell” a percentage—it varies based on several factors—of their future credit card sales, granting them access to working capital almost instantly. In fact, you can be approved for an MCA in just a few days and receive funds within about a week or so. However, MCAs aren’t for everyone. They’re better suited for businesses that have consistently high credit card sales, as this is how they are paying back the money they owe. Restaurants and retail stores are usually good candidates, as well as other types of businesses.
Pick Your Suppliers Wisely
Not all suppliers and vendors are created equal. While some are more than willing to work with you, and actually care about the professional partnership you’ve formed, other are only concerned with getting paid. Consider re-examining the relationship you have with your suppliers, and compare what others may be able to do for your business. If you’re not necessarily interested in switching suppliers just yet, this 2010 Entrepreneur article provides some insight into improving supplier relations.
Take a Look at Your Credit Card Processing Statement
Most businesses, regardless of size, accept card payments from customers. Oftentimes, this involves setting up a merchant services account to receive the proper credit card processing equipment and services.
However, like anything else, it costs money, and many merchant services providers take liberties when charging their customers. That is, they charge at higher rates and add in hidden fees. As a result, you may be paying more for your merchant services than necessary. Consider contacting another credit card processing company to help determine if you should continue working with your current provider or get an account elsewhere.
Solicit Customer Feedback
While it may not seem like such a suggestion is meant for a cash flow strategies list, consider this: One obvious cash flow management strategy is to increase sales. More sales means more profits, which increases the inflow of cash. But as most business owners know, making more sales is much easier said than done. This should be an incentive to find out more about what your customers want, and how happy they are with your products and/or services. By asking for customer feedback, you’ll learn about some of your company’s pain points and make the appropriate adjustments to increase customer satisfaction and loyalty, as well as attract new customers to your business. This 2016 Forbes article offers some advice on how to encourage customers to share their thoughts about your business.