Even before the pandemic, many small businesses were looking for ways to increase their cash flow. Business experts have found that one of the main reasons businesses go out of business is because they fail to manage their cash flow. Cash flow and profit, while related, are not the same. As Harvard Business School Online explains, “Cash flow refers to the net balance of cash moving into and out of a business at a specific point in time.” But profit, “Is typically defined as the balance that remains when all of a business’s operating expenses are subtracted from its revenues. It’s what’s left when the books are balanced and expenses are subtracted from proceeds.” You can be making a profit, but still have problems managing your cash flow. Smallbiztrends has gathered tips on how to successfully increase your company’s cash flow. We’ve selected the ones we think you’ll find most helpful.
Cut Costs – If cash is tight, or you’re worried it soon will be, look at your payables to see where you can cut back. Is your rent too high? If you’re actually occupying office or retail space today, you may be able to negotiate with your landlord for a rent reduction since so many companies are operating remotely. Do you actually need to be in an office, or can you switch to virtual operation? This can save you a lot of money on basic overhead costs. (Remember, all of VersaTel Solutions services are done remotely.)
Negotiate / Incent Better Payment Terms – Are your steady customers paying you net 60? Can you bump that up to net 30 or even less by offering discounts for early payments? Of course, do the math first to make sure getting paid early is worth collecting less money. If your steady customers pay you every month, can you convert them to an annual contract by offering a discount off the monthly price?
Apply for a Line of Credit – Business lines of credit are great to fall back on if you do encounter a cash flow crunch. You don’t pay anything until you use the money. But the best time to apply for a line of credit is before you need it.
Consolidate or Renegotiate your Business Debt – If you owe money now, talk to your lenders. You may be able to negotiate for a lower interest rate or extended payment terms, which can help boost your cash flow. Many lending institutions have created special programs during the COVID-19 pandemic to help struggling businesses hang on.
Use the Business Credit Cards that Best Suit Your Business Needs – Having a rewards business credit card can boost and increase your cash flow by allowing you to pay for purchases with the points or miles (for airline cards) you’ve earned. (I’ve bought computers this way.) Also, look for cards with low-interest rates and annual fees.
Cash flow problems are nothing new, but the pandemic has exacerbated them for many. Our bookkeepers will help you keep track of your money, while freeing up your time so you can find more clients and customers. Reach out to us, and we’ll match you with a bookkeeper that’s best suited to your business.