No small business can stand strong without managing its cash flow. About 82% of business failures happen due to poor cash flow management, making it more important for the long-term success of the business. These companies often experience cash flow issues due to the inability to take the right decisions. So, if you are looking for ways to improve cash flow, this article is all you need.

Maximizing the company’s cash flow fosters profitability, quick achievements of the business goals, and less operating costs. So, let’s find out the top 10 ways how to increase cash flow for maximum profitability & further growth of the business.

Top 10 Tips to Improve Cash Flow

Increasing a business’s cash flow seems difficult at first, but a few changes in the operations can bring surprising results. If you’d like how to improve cash flow in small business, consider these 10 ways as your know-how guide:

1. Raise Prices of Goods or Services

Business owners have a fear of losing potential customers due to an increase in the prices of the products and services. However, it is better to experiment with different pricing structures. By experimenting with the different pricing structures, you will be able to set the prices that fit all types of customers. The purpose of increased prices is to know who is willing to pay before the start of the sales.

2. Utilize a high-interest savings account

Utilizing high-interest savings accounts provides liquidity to small businesses, in order to help them improve overall cash flow. Many banks offer accounts that can earn interest with minimum requirements of balance. In both business savings and money market accounts, interest rates will be higher than standard accounts.

3. Implement Electronic Payment Systems 

With electronic payment submission to vendors, your business gets the time to make a payment. This delay in payment works well in improve the cash position.

In addition, business credit cards provide grace periods to delay the payment for weeks. This can also help your small business increase its cash flow. Credit card payments can also provide you with exciting rewards. However, it’s crucial to not obtain too much debt before paying it off.

4. Automated sending of invoices

Automated sending of invoices often occurs with delay. However, by sending invoices to someone who owes you money for products or services immediately, the delay in invoicing gets reduced.

With digital services like Flint and SquareUp which provides automatic sending of invoices, you’re going to receive payment days faster than conventional methods.

5. Streamline Inventory Management

Proper inventory management is crucial to maintaining positive cash flow. Manage your existing inventory instead of increasing it with the new items. The late delivery of the products can lead to cash flow issues for your business and decrease customer satisfaction.

Integrating inventory systems using a point of sale system can be a good way to streamline your inventory management system. Many POS software providers offer inventory features and integration.

POS software provides features to set alerts when inventory gets low and automatically reorder.

Another way to manage your inventory is to sell the remaining items of the existing inventory and then focus on other inventory options in the future. If you’re looking to earn extra cash flow improvement for your small business, it’s better to be objective with your inventory.

6. Conduct credit checks for customers

Many customers don’t prefer cash payments for their purchases. So, providing credit card options allows your customers to consider another form of payment.

If they are one-time customers, your credit card options help them to pay for a product or service with a credit card. However, if they’re paying a large amount for a recurring product or service, make sure to conduct credit checks. You’ll know if they have poor credit or not, helping you make the right decisions. Late payments often have a negative impact on the cash flow of small businesses.

On the other side, making a sale with someone who has no credit issues can allow you to set the payments with higher interest rates.

7. Receive Early Payments with Discounts

Customers love discounts and other offers. By offering discounts on expensive recurring products or services, you’ll more likely to get advance payments. You receive an early payment as a small business owner and your customers get their discounts, a kind of win-win on both sides.

As a result, receiving early payments is one of the best way to generate cash flow for your small business.

8. Consolidate your debt

In case your business has debt to pay each month, cash flow management will be more difficult. Cash flow issues arise more in the high-interest credit card debt. Therefore, debt consolidation can help in improving cash flow. Many lenders offer term loans for the use of consolidating debt.

9. Lease instead of buy

Leasing equipment, real estate, or supplies could end up costing more in the long run than completely purchasing them. However, it can be a better option for a business whose priority is the profit margin. Even if your primary goal is to increase income, maintaining streams of cash would be essential to handle day-to-day operations.

With leasing instead of purchasing, you can pay for the items in small increments. Small payments can assist you to improve cash flow.

10. Pay Suppliers Less

Making friendly regular communication with suppliers allows you to have a better chance of agreeing upon favorable terms and conditions. In order to pay less to your suppliers, negotiate with suppliers & convince them to land you with a better deal.

The Bottom Line

Maintaining a healthy cash flow is the key to the long-term success of a small business. Positive cash flow is the result of effective operations. Use the above 10 ways to help you increase your business’s cash flow and grow revenues.

FAQs for How to Increase Cash Flow As A Small Business

Q1- What Is Cash Flow?

Ans- Cash flow is the process of going in and out of the net amount of cash of a company. A company’s success can be determined by its ability to create positive cash flows through business operations. Cash coming into a company, known as inflows, consists of revenues from the sale of goods or services as well as income from investments. Cash going out of a company, known as outflows, consists of expenses and debt payments.

Q2- What Are the 3 Types of Cash Flow?

The three main classifications of cash flows include cash flow from operating activities, cash flow from financing activities, and cash flow from investing activities. All of them will appear on the statement of cash flows on a company’s financial statements.

Q3- How can a business improve its cash flow?

Ans- Business Improve Its CashFlow By

  1. Negotiate quick payment terms.
  2. Give customers incentives and penalties.
  3. Cut unnecessary spending.
  4. Consider leasing instead of buying.
  5. Maintain a cash flow forecast.