Running a small business can often mean tight margins and watching each dollar that comes in. Sometimes, it's hard to manage cash flow if you're trying to buy in bulk to reduce the costs of each individual item or if you need to invest in equipment or upgrades.
We've collected five great, easy-to-implement ways for small businesses to improve cash flow.
Reevaluate Your Pricing Structure
If you've been in business for a while, you may not have completed a price comparison recently. You may be able to charge a bit more for your goods or services now than when you were first starting because you've built up a history of solid performance.
For example, if you offer professional services, like accounting or legal services, you may be able to charge a new client a bit more per hour than you're charging current clients. If you sell tangible goods, then you may be able to sustain a 10% bump in prices without driving away customers.
Completing a comparison shop-around ensures that you're placing yourself correctly in your market. Not every consumer shops solely based on price, and if you've established yourself as an authentic, trustworthy brand, then you can keep your customers, even if they're paying more.
Offering online payment services for clients can make it easier for them to pay you right away. Make sure that you're invoicing promptly and consider emailing invoices versus waiting for mail delivery. If you offer a link to an online payment portal in the email, then your clients can pay right away. You may also wish to offer an incentive for paying early or assess penalties for late payments.
If you don't invoice clients and they instead pay for their purchases immediately, consider offering online sales in addition to your brick-and-mortar store sales. You can also, if you haven't already, expand your payment options, such as offering Apple Pay and Google Wallet services. Don't miss a sale because you can't take your customer's money!
Update Your Equipment
investing in equipment, from point-of-sale machines to specialty production equipment like a baker's oven or sewing machine, can be one of the largest start-up costs for a small business. You may find that older, less efficient machines are slowing down your ability to create goods for sale or that older software isn't as efficient in keeping up with client needs, online sales, or daily business operations.
If you haven’t already, consider leasing your equipment instead of buying new or secondhand. Most lease agreements come with a maintenance package, which can end up saving you money on repairs and preventive maintenance.
Plus, when you lease equipment, you can typically upgrade every few years, ensuring that your business has the leading-edge technology and machinery it needs to run efficiently and improve your products and service. Everything from cash registers to phone systems can be leased, possibly saving you a bundle in the long run.
Renegotiate Your Supplier Contracts
You may be in a better position now that you're established to negotiate better pricing from your suppliers. If you have a steady history of on-time payments and you've been consistent with orders, then asking for a better deal can help reduce your overhead and improve cash flow. Or maybe there's a new supplier in town that can offer you a more attractive package.
Make sure if and when you do change suppliers that you're getting a dependable replacement. You may wish to start small, ordering 15% or so of your items from the new vendor, until they've demonstrated quality and consistency.
Focus Your Marketing
Improving your cash flow isn't just about cutting expenses. You can also bring more customers in or increase sales to your current customers with a better marketing strategy. For example, your website should work for you as a sales tool, not just to provide information. You may choose to have an online store or offer other resources for your customers.
Many people respond to brands and businesses that are authentic and engaging. For instance, a website that offers useful content creates a greater level of trust with your customers. If you have a bakery, for example, you may wish to post short videos with at-home baking tips for your customers. Or a clothing boutique can provide sneak peeks of new arrivals and blog posts about the latest fashion trends.
Regularly taking a look at how much you're spending can help improve your cash flow. And if you aren't actively growing your business, you may be missing out on new customers. By incorporating tighter spending and growing your business through better marketing, you can easily begin to see results.