Many companies experience cash flow issues — money needs to come out, but not enough money is coming in. Ideally, you want a continuous flow without having to rely on regular loans. There are a few potential fast fixes that could be worth looking into. Below are 5 examples of ways to quickly patch up your cash flow.
By Team Savant
Image: omid armin
1. Introduce Measures to Tackle Late Invoices
There’s nothing worse than doing work and not getting paid for it. Some clients are terrible at paying on time. Don’t be too lenient with these clients, otherwise they’ll keep taking advantage. Instead, consider these measures to reduce late invoices:
Send invoices immediately, not in batches.
Add clear due dates and introduce late payment penalties.
Consider allowing small discounts for early payments.
Make paying easy by accepting credit card or bank transfer.
If you’re really squeezed and sitting on a big stack of unpaid invoices, you might want to consider invoice factoring, where a third party company pays you most of the value of your unpaid invoices upfront and then takes on the duty of collecting money from customers. Take your time to compare different invoice factoring companies.
2. Unlock Regular Passive Incomes to Survive Dry Periods
During low sales periods, it can be useful to still have regular predictable payments coming in. Consider whether there are any ways to unlock passive incomes or regular payments instead of relying on one-off payments. This could include:
Encouraging monthly subscription services, paid memberships or automatic repeat orders/prescriptions.
Allowing customers to pay for big-ticket items in monthly installments to spread out the cost.
Renting out spare office space or equipment to another business.
Exploring other passive incomes like ad revenue and investments.
For seasonal businesses, exploring these income sources can be vital for keeping cash flowing during the off-season.
3. Turn Idle Assets Into Cash
Do you have stuff lying around that could be sold to free up cash? During tough periods where you’re not getting many sales, consider selling spare equipment or furniture that you’re still clinging onto. You may also be able to sell excess stock by selling it to other companies cheaply, or by simply running a clearance sale (getting some money for it is better than getting nothing for it - especially if it’s nearing expiry).
4. Carry Out Regular Financial Audits With the Help Of a Pro
Financial audits every few months can help you to assess your income and outgoing costs. You can decide whether to adjust your budget, increase pricing, cut back on certain things or invest more heavily in certain areas. Often it’s worth working with third-party financial experts - consider CFO support services or talk to your accountant.
5. Cut Back Any Unnecessary Costs
On top of looking at what’s coming in, you need to assess what’s coming out. Regularly trim any unnecessary expenses. This could include:
Ending subscriptions to software or services you no longer need.
Negotiating cheaper terms with current suppliers or shopping around for cheaper suppliers.
Coming up with leaner marketing strategies that are more focused and cost less money.
Investing in improvements that reduce energy or fuel costs.
Focusing on earning more should always be the priority, but cutbacks will save you during those months when revenue cannot be increased.