Top Tips for Improving Business Cash Flow

It’s sometimes easier said than done to keep your business books balanced. With suppliers and client accounts pulling at either end of your finances, cash flow is one of the top concerns of small business owners the world over, and staying on top of it can feel like a real challenge.

Fortunately, there are lots of things that you can do to make sure that your business finances stay in the black – and we’ve compiled some of the very best to keep you on the straight and narrow.

What can cause cash flow problems?

There are lots of reasons why a business might have cashflow issues, from seasonal imbalances caused by the natural peaks and troughs of the business year, through to more problematic sources of money trouble such as declining sales or a flawed business model.

Regardless of what’s causing your cash flow troubles, tracing the problem back to its roots will probably reveal a common cause – financial planning issues. These all-encompassing problems can range from failing to use appropriate payment terms through to imbalance between supply and demand.

Fixing cash flow issues in a small business

If you’re worried about the financial effects of the COVID-19 crisis or anything else, improving your cash flow should be a top priority. In some cases, businesses may choose to completely change their model to improve their cash position – but there are also some less serious steps you can take to bring things back under control.

1. 1. Cut costs

It may be the most direct way to fix a cash flow problem, but reducing expenses can be easier said than done. For one thing, some businesses go about this the wrong way by cutting down on costs that, whilst expensive, are integral to the firm’s revenue generation.

It makes more sense to start with non-essential expenses before moving onto things like inventory, marketing, and labour. In some cases, trying to cancel a contract will see your suppliers offer a discount, which could help your efforts too.

2. 2. Review your business assets

In a similar way, selling off some assets could allow you to provide your business with an immediate cash injection. For plant and heavy machinery, it may be worth considering whether you’d be better served by leasing your business-critical assets – hiring them at a reduced monthly cost whilst benefiting from the lump sum generated from a sale.

As with costs of any kind, it’s important to remember that business assets may be integral to your chances of generating revenue – so don’t be too quick to sell off everything without a backup plan.

3. 3. Pick up the slack with invoices

All businesses could benefit from improved invoicing methods, and so this should be a key consideration for anyone who wants to fix solve their cash flow woes. It could be that you set up an auto-billing cycle, encourage early payment with discounts, or invest in a robust accounting solution to ensure you can stay on top of invoices.

4. 4. Use loans strategically

Perhaps the easiest and quickest answer to a cash flow issue is to seek out a short-term personal loan. These generally have very agreeable lending criteria, and funding could reach a company Director’s account on the same day they make their application.

For the very best options, using an online credit broker like Little Loans could help you to find a quick short-term loan that gets your business back on its feet. It’s the simplest way to access money in a pinch, and the total cost of the capital can be less expensive than some longer-term options even if they offer a lower APR.

5. 5. Extend your payables

If it really comes down to it, businesses may be forced to negotiate with their suppliers and other creditors for an extension. Seeking out extra time could give you the space you need to put in place the steps we’ve already discussed, but business owners should be aware that doing so could damage their relationship with suppliers.

All things considered, poor cash flow has been the downfall of many businesses, so it couldn’t be more important to get your situation sorted, money into your account, and your bills paid. By following the steps above, you could improve your business’s prospects of long-term survival.