Knowing how to increase cash flow is one of the most challenging aspects of running a small business, and mastering it is the key to long-term success. Many businesses fail in their first few years, and one of the main reasons for these failures is cash flow problems. Fortunately, many tools and techniques are available to help small businesses manage cash flow and achieve success. Let’s explore these tips and tools.
What is cash flow and why is it so important?
Managing cash flow in your business is similar to managing your household budget. Although managing cash flow in your business is more complicated, the principle is the same. You need to generate enough cash to pay your bills and obligations. You also want to have a little leftover to enjoy or reinvest in your business growth. If you don’t manage your cash flow, your business could struggle to stay afloat.
Top 6 methods for increasing cash flow
The concept of cash flow is simple, but putting it into practice can be complicated. Here are a few of the things you need to consider and explore to make your business a success.
1. Create a cash flow forecast
Forecasting is important for managing cash flow. Knowing your upcoming expenses means that you have time to adjust and ensure money is there when you need it. There are software and apps which can help make this process simpler. You can choose something that only focuses on cash flow, like Xero, or a solution that provides integration and other functionality, like Float or Fluidly.
2. Expand payment options
Another way to increase your cash flow is to expand the number of ways that you can receive payment. Having a single form of payment, like PayPal, could limit the number of people who can purchase your services. Try adding other electronic payment methods like Square, which allows you to collect funds immediately after providing a service. Afterpay is another popular option that allows your customers to make 4 partial scheduled payments for your service.
3. Update service prices to reflect the current market
Be on the lookout for market changes and what your competitors are charging. If your services are underpriced or overpriced, this could impact the cash you have available. Adopting this strategy doesn’t mean that you have to change your prices every time your competitors do, but it is important to price accordingly.
4. Customer Relationship Management (CRM) Software
It can be hard to keep track of customers’ data, invoices and payments Fortunately, there is plenty of CRM software available that allows you to simplify and automate the process. You can use it to capture contact details, store data, send automated messages, invoices and follow-ups after a service.
5. Consider current assets
If you should ever find yourself in a moment of low cash flow, you could look into selling any unused machinery or equipment. Equipment that is sitting around and not being used is a liability that could be quickly turned into liquidity.
6. Consider tax time
Everything you do, whether it is making a purchase or making a profit, will have an impact when it comes to filing your end-of-year taxes. It’s important to keep a record so you can take off the deductions that you are allowed. Knowing what taxes you will owe also helps you predict what you need to have set aside. The most important thing is to be prepared so you do not get caught at the end of the year with an unexpected tax bill.
Helpful cashflow programs
Here is a few popular cash flow management software to help automate and simplify processes for small business owners.
- Xero
Xero accounting software is an online solution that allows you to pay bills, claim expenses, connect to your bank, accept payments, and reconcile your bank statements.
- Float
Float gives you resources that include cash flow management tools, planning tools, and scheduling software.
- Futrli
Futrli is powerful forecasting software that helps you make better business decisions. It helps you predict sales, expenses, and profits.
- Fluidly
Fluidly automates forecasting and presents the information in graphs and charts that are easy to understand. This software gives you the information that makes business decision-making seamless and easy to see your options.
Managing cash flow is one of the most important skills that you can learn as a small business owner. Fortunately, there are now tools available that make it easy. Knowing how to increase cash flow in small business management is the best way to create a successful enterprise in the future.