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How to Maximise Cash Flow Efficiency

For your business to prosper and grow, you cannot just manage your cash flow, you need to maximise it. Even highly profitable businesses can experience cash flow problems, if operations, finances, and investment activities are poorly handled.

It can be tricky to manage business operations and finances in a way that boosts cash flow efficiency, but it’s not impossible. To promote healthy cash flow, more cash inflows need to be created while also limiting cash outflows. To get this right, a business owner must not only focus on sales, but also pay attention to how the business is collecting income and what (and how much) the business is spending its money on.

7 Ways to Ensure Healthy Business Cash Flow

Boosting cash flow doesn’t have to be a complicated process. There are practical things that you can do to ensure that cash flow is readily available, when required.

Below are a few tips on how to maximise on cash flow efficiency within your business:

Expand business opportunities with quick loans/short term loans.

Short term business loans are a great way to boost cash flow and build a good credit score at the same time. Using everyday cash to fund business growth can put your business in a precarious financial position. With a business loan you will be able to plan a budget based on fixed, expected payments/costs.

A quick loan can provide you with an immediate lump sum that you can use to grow your business in the following ways:

  • Expand into new markets.
  • Buy more stock.
  • Handle projects that would otherwise be ill-affordable to the business.
  • Pay for unexpected expenses.
  • Cover costs (bridging cash) during seasonal slumps.
  • Move to or construct new/bigger premises.

Multi Month Loans offers quick loans that you can apply for online and use for business cash flow purposes. The entire process is paperless with 15-minute approvals and 24-hour cash pay outs.

Keep on top of invoicing and payments.

It is vitally important to ensure that money owed to the business flows in steadily. Invoicing should be done promptly and your payment terms made clear to customers. If you don’t have an accounting system that’s quick and easy, consider investing in a Cloud Based accounting system.

If you don’t want to run the risk of waiting for customer payments (and non-payments), you should consider invoice factoring or invoice financing. This is a way of selling your outstanding invoices to factoring companies that “buy” your invoices and pay you immediate cash. The factoring company takes a percentage of the invoice amount – which is a small price for you to pay, when you consider that you won’t have to wait for payments or chase payments up.

Incentivise prompt payments and penalise late payments

Many businesses experience problems when it comes to collecting payments. This can cause a serious cash flow problem. By incentivising early payments, customers will be more prone to pay on time. Perhaps offer a discount for paying within 7 days or offer freebies when a certain amount is spent.

Much the same, late payments should come with a penalty attached. Charge a late payment penalty if customers miss the due date on their invoice. If you do go this route, make sure that you are very clear about both the incentives and penalties when you take on customers.

Provide a variety of payment options to customers

Customers often delay payments because the payment options aren’t convenient or easy for them. Ensure that you offer a variety of payment options for customers to use. Consider cash, online payment processing (via your website), direct deposit, electronic funds transfer (EFT), credit card payments, debit card payments, travel card payments, Tap ‘n Go, PayPal, and various other mobile app payment platforms available.

Scrutinise your budget and find ways to cut back on operating expenses.

As your business grows and gets busy, it’s easy to lose track of your expenses. You could be overlooking expenses that you took on in the beginning that you no longer need or can cut back on now. Take a look at a list of your expenses (or bank statements) and then take some time to look for cheaper suppliers/providers. You should also look for services and subscriptions that you can get rid of.

Lease equipment instead of buying.

Buying equipment and assets is an expensive endeavour. In fact, it can set your finances back considerably if you are paying out lump sums for computers, machinery, vehicles and so on. To maximise cash flow efficiency and give your business a chance to grow, lease equipment instead of buying. By leasing, you can get away with much lower monthly payments and keep your cash flow steady at the same time.

Recover Cash on Poorly Performing Products.

Many businesses make the mistake of allowing slow-selling stock items to sit on shelves or in storage. If products aren’t performing as the business hoped, be prepared to lower prices to recover costs. Bringing in small amounts is better than making no sales on a product line at all. Take a close look at your inventory list and decide which items can be repriced to increase sales and boost cash flow.

 Carry Out Credit Checks on Customers.

One way in which businesses suffer cash flow problems is when customers simply don’t pay. According to the UK Money Advice Service, many families in the UK are struggling with debt (and keeping it a secret) and not making payments on their accounts. This often happens when businesses open accounts or provide a line of credit to individuals who are not in a suitable financial position to afford the expected monthly repayments. To ensure that you are only providing goods and services to individuals who can afford to pay for them, carry out credit checks with Experian or one of the other credit bureaus.

Last Word on Cash Flow

Boosting cash flow is not something that happens by chance. It takes strategic planning and meticulous follow through. Follow the tips above to maximise cash flow efficiency for your business and spur your business onto greater success.