How To Increase Cash Flow in Your Business at the End of the Year
You’re a business owner. You know that cash flow is key to keeping your business running successfully.
It happens to all businesses, even if you’ve been doing everything right, at years end you may see a stall in cash flow beyond your holiday sales.
Of the many hats we wear as a small business owner, the financial one seems to be one we struggle with and are maybe even a little scared to put on. However, it's the part of owning a business that we need to be aware of and understand what the numbers mean and then hire a financial and tax pro to explain and set up goals and a financial plan to follow.
You need to always learn how to increase cash flow, whether it’s the end of the year or any other time, because cash flow is the difference between staying in business and having to close your business.
So, how do you increase cash flow at the end of the year?
In this post, I’ll give you 7 strategies to help you do just that.
- Reduce your spending. Decreasing your spending is one way to increase your small business cash flow. The challenge lies in finding a way to make savings without sacrificing quality of your customer service and if you have a team support for them as well as your family.
- The first step to this strategy is to carefully analyze all your business spending. How much do your office supplies and electrical bills cost every month? How much are you paying for insurance, employee salaries, and other bills?
- Analyze your spending to find areas where you can save money. It's very important to approach spending cuts carefully because pay cuts can drive employees away. If you’re trying to save money by using new less expensive services the quality of the products and service could be poor, thus bring unhappy customers that will add to cash flow issues. Evaluate other areas that are not needed during this last quarter that you can pause that doing so won't have cause noticeable affects to customers.
- Extend discounts for fast payments. If you’re trying to encourage your customers to pay faster to increase your cash flow, then offer additional incentives or some sort of discount for faster payments may help.
- The incentive doesn’t have to be large, but customers may appreciate a small amount of savings on a future purchase. Try several payment plans with different levels to encourage more clients to make a full or partial payment now.
- Look at your inventory. Is a large portion of your cash tied up in inventory?
- Maybe inventory is the lifeline of your small business, but you don’t want it to ruin your cash flow. Your products shouldn't sit in warehouses for decades. To have a successful and profitable business, it’s important to learn how to control inventory. Take a hard look at what is sitting on shelves and if you have not moved any of those products in a while or they seem to be slow sellers then price them to sell and at least generate a small profit or cash flow.
- Find a balance between having enough inventory to satisfy customer needs and having too much.
- Raise your prices. Are you keeping up with inflation? You might need and be able to raise prices on your products and services to keep up with the market.
- It’s costing more to run a business and the same is true in our daily lives. Clients and colleagues are all facing higher fees on everything. Increasing your prices can lead to more cash flow, but they may also scare away customers. Find a balance that works for your business and your customers. Raising prices is always difficult for any business owner, but especially creatives entrepreneurs because that often means asking for more money for our creative services or talents and we let that self-doubt of who do we think we are asking for an increase in doing what we love, but you need to keep up with the cost of doing business so you can continue to keep your business open.
- Maybe Consider collection agencies. Do you have many customers who haven’t paid their bills?
- While this is another hard decision, if you have several outstanding payments due to you and have been the fabbo nice owner for months on end and the client has not responded then it might be time to send their unpaid balance to a collection agency. At the very lease they can help you recover a portion of the unpaid bills. They charge a fee and take a percentage of the money. However, you may not have the time to pursue the customers who haven’t paid, and they have no interest in continuing to use your services or purchase additional products. Always hard to take this harsh approach, but you can only be so patient and with not cooperation from the client, you must protect your business and do what you need to do to support your family as well.
- As a Last Resort Consider court. For larger amounts, you may have to get a lawyer and take your customers to court for unpaid bills. This is never an easy solution, and it can get take more time and get messy with the client but again, if they have not been responsive to all your requests for payment and you have exhausted all other options, it is one way to increase your cash flow even if it’s not the full amount, court rulings may be able to force them to pay their overdue bills. It will also allow you to satisfy this outstanding client in your books as well. Check with your tax person and attorney for best advice.
- Offer prepayment rewards. You can offer a variety of rewards ranging from some additional time added to a package they purchased, adding a free upgrade, to special rates on future purchases.
- You can create an extra special rewards program with gift cards or other items for clients who prepay their large packages, services, or multiple items that have a balance if full before years end. These rewards can encourage them to stay and keep buying your products or services.
Your business may benefit from more cash flow. Incorporate several of these strategies into your business operations to discover what works best for you so you can generate more cash flow above and beyond your holiday sales so you can end the year profitable.
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