In a business, cash flow is vital. Between paying bills and workers to expanding your business further, good cash flow control is one of the most important aspects to keep a business alive. Large amounts of small businesses experience cash flow problems due to late paying clients or unexpected bills. Cash flow is the main cause of businesses shutting down with 80%-90% of small businesses closing because of similar problems. If there is no cash in a business, it will be difficult to pay all your workers and bills and may make it difficult to expand your business. Bad cash flow can also affect almost every aspect of a business including staff morale.
It is classed as “unprofessional” for business owners or sales people to chase up late paying clients and there should be a divide between sales and accounts receivable. However, a small business may not have the staff like a larger business or it may even be left down to the boss to chase up clients and keep control of the accounts. Time spent chasing clients for payments can also make the situation worse as time is not being spent on probably more critical parts of the business and chasing late payments can also severely damage customer relations resulting in a loss of business.
Some ways cash flow could be improved in a business is by negotiating with your suppliers to see whether earlier payments could make them bump down the price and leave a bit of extra cash in the business. Suppliers would offer these if you are a long-time customer who can be trusted or maybe even offer earlier payments which would get the bill out of the way faster. Another way for improving would be to offer incentives to pay back earlier. This could be discounts on later payments or even exclusive offers. This would mean older customers that would be more willing to come back to you or it would give new customers a reason to pick you over your competitors. Also, try to improve your inventory space by segmenting your customers and get rid of products that aren’t selling as well as other goods and use the space to maybe fill it with a better good or more of some of another good that is selling. This would mean there is next to no wasted space and you have a new and possibly better set of goods and appealing to more of the demanded products in the market. These are NOT all of the ways to improve cash flow and there are more!
So, maintaining a good cash flow is critical for a small business to survive. Although sometimes the cash may not be rolling in, there are ways that could help increase or at least maintain what you have until better times prevail. Make sure that your cash flow is looked after and if it isn’t, get it under control!
Let Numerical help you improve your cash flow. We offer inclusive Accounting and Account Management packages to take the strain (and time out) of managing your accounts and improving your CASHFLOW.