All businesses, from the most humble start-up to a sprawling multi-national, rely upon cash flow to keep their businesses alive. It doesn’t matter how much money you have generated in the past; you need your customers to keep paying you consistently if you are to cover your overheads and stay afloat.
Indeed, although you might imagine a small start-up is the most vulnerable form of business when it comes to cash flow, larger companies can be more at risk if money starts to dry up.
This is because you may have more money invested in infrastructure like real estate and supply lines, as well as more staff salaries to pay and more investors to keep happy.
Regardless of your business type, you need to find ways to boost cash flow. It should be a constant target that is never truly reached. After all, there are always improvements to be made, and as your company grows, there are new ways to unlock a more consistent flow of cash.
Here are some top tips for boosting cash flow within your business.
Use invoice financing
One of the most severe threats to any business (which never truly disappears) is that of a customer failing to pay on time. The reason for this is simple – you cannot control your clients, and there are a million excuses for them to fail to pay punctually.
Perhaps they are experiencing cash flow issues themselves or don’t have their usual demand for your services during a particular month. Whatever the reason, slow payment can quickly cause your business to unravel.
Unless you have vast amounts of savings, you may struggle to pay your staff, contractors, investors, or suppliers on time, which will have knock-on effects further down the line.
For example, you may then struggle to produce new products or services the following month, which will decrease your profits and keep you heading in a downward spiral.
Of course, although you can’t control your customer’s actions, you can take matters into your own hands.
With invoice financing – such as that available from fundinvoice.co.uk, you are paid the money you are owed by a third party immediately. When the actual cash comes in, it will be paid directly to the lender.
Set stricter payment terms
Another approach you can take to boost cash flow is to negotiate stricter payment terms with your customers.
When a certain payment deadline is written into your agreement, you will ensure that you are paid on time.
What’s more, you can do the same with retainer clients if that is appropriate for your business model. If they can’t give you enough work in a particular month, then you could deter them from being a client altogether.
Although this sounds counter-intuitive, it helps you maintain consistent income throughout the year, which is useful for investing in your company and plotting a strategy.
Create new income streams
If your current income streams are proving inconsistent occasionally, then it may be time to create new ones.
Having multiple income streams in your business prevents you from becoming reliant on any single payment – which can easily disrupt your company.
The easiest way to create a new income stream is to take on more clients, who can each offer a balanced share of your total monthly income.What’s more, the more profit you make every month, the more you can save for a rainy day when your income decreases unexpectedly.
You may also want to consider introducing new offers, which will entice a fresh group of customers, increase your bottom line and potentially make your business more balanced as a result.
Take a look at your overheads
Lastly, you need to ensure the overhead costs you need to pay for every month are as minimal as possible.
Whether it is the rent on your office, the associated electricity, water, heating, and insurance costs, or the payments you make to your suppliers, you need to prevent yourself from being caught out by high monthly costs.
Make sure these are as small as possible to reduce the impact of cash flow issues on your business.