9 Ways to Improve Cash Flow

Running a business requires a keen eye for managing the company’s cash flow. As a businessman, you should be aware of the techniques for increasing your revenue. If you need to know how to improve cash flow, then let’s dive into this article.

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How to Improve Cash Flow?

If your sales as a new businessman are going faster than expected, then you are making the right business decisions with a strong business policy. Increased profit means an increased inflow of cash into your company account, but it is also challenging to manage increased cash flow and other costly operations.

For example, if your accounts payable are more than the amount you are getting as receivable, then you are certainly in debt, and you might face problems in managing cash flow. This means that in the near future you will face problems like late bill payments, late tax returns, underpaid or overpaid HMRC payments, and inaccurate self-assessments. If you are struggling with how to improve cash flow, follow the ways mentioned below:

• Lease, Don’t Buy

Generally, leasing office supplies, equipment, and real estate usually costs an extra amount of money over the actual price, and that might not be considerable to you at first. But when your business is going down, leasing is the best option to buy the equipment, supplies, or real estate and complete the tasks rather than waiting to have enough money to do so.

Leasing gives you the option of returning the cost in bits, which is acceptable in a recession period. This allows you to carry out normal company operations with less burden on your pocket and save enough money for other company matters.

• Offer Discounts for Early Payment

If you are facing problems in your accounts receivable, then you should apply this technique. Offering incentives will attract more customers and encourage people to make early payments. This will increase your accounts receivable and company sales. Consequently, the cash inflow in the company account will be increased.

• Conduct Customer Credit Checks

You should always prioritise cash payments; however, if a customer is unable to pay you in cash, then be sure to get a credit payment from them. If the customer has low credit in their account, you can predict that there will be late payments in the future, and you can decide whether to sign the agreement or not. If, in any way, you decide to sell your product, then you should sell it with a high interest rate so that your cash flow is managed.

• Form a Buying Cooperative

Team up with like-minded people! Think of expanding your business in numbers. Coordinate and do business with people who make policies, keeping numbers in mind. This will change your way of policymaking, thus paving the way for increased, well-managed cash flow.

• Cash Flow Forecasting

As the name says, this practice allows us to forecast the future cash inflows and outflows in the company. This data is used by companies, big or small, to plan future short-term and long-term investments as well as the expansion of their business or its upgrade.

• Effectively Manage Accounts Payable

Tracking and maintaining records of accounts payable is the most important practice in cash flow management. A periodic accounts payable reconciliation is important to reduce late payments, ensure timely transactions, and forecast expenses. Moreover, you should send reminders to the clients before the due date of the installments to avoid any discrepancies in cash flow.

• Improve Your Inventory

Inventory check is important for your business to grow and thrive. You should restock the new equipment and replace what you have, and ensure that all equipment is accounted for when handling inventory. To purchase new equipment, you will need cash in your account. If you have outdated equipment in your inventory, it also holds a significant amount of cash.

Continuously buying the same old equipment that is not selling is not advisable. You should eliminate the old equipment to keep pace with new market trends. By selling the older equipment, you can buy new items, which will also enhance your cash flow without costing you a large sum of money.

•  Send Invoices Out Immediately

Sending out invoices is also another way of improving your cash flow in the company account. By sending invoice images to the customers, you will see debits coming out and being credited into accounts immediately. You should make sure that you understand the basics of how to make a good invoice that conveys the full details and also makes a good impression on the customer.

The invoice should have the due date stated in a few places and include the date of the next installment that is due in the coming days as well. The right cash amount is to be paid to the company. If you charge late payment fees, you should make sure that you mention the late fee in the invoice as well.

• Pay Suppliers Less

Paying suppliers less is also another technique of maintaining cash flow in your company account. If you maintain friendly communication with the suppliers, you may get a special verified discount while buying new equipment from them. Offer suppliers early payment so that they give you an early bird discount.

You can save that money for other companies’ matters. Learning the art of negotiation is an important part of growing your business. Being a businessman, you should know how to negotiate and how to read the minds of other people.

Conclusion

How to improve cash flow is the question most new businessmen are encountering while managing their business. The cash flow in the company is managed by early payment to suppliers, keeping a record of accounts payable, and sending regular reminders to customers for timely payments. Prioritising cash payment is also another way of managing cash flow. Replacing new equipment with the older helps you save cash, which is spent on repairing the old equipment.

Disclaimer: All the information provided in this article on how to improve cash flow, including all the text and graphics, is general in nature. It does not intend to disregard any professional advice.