How to improve your business cashflow

As a business grows, the importance of cash flow becomes more important. Cash flow is the lifeblood of any business, no matter the size. It can be the difference between staying afloat and shutting down.

Cash is defined as a liquid asset that is available for immediate use. It can be in the form of cash, bank deposits, and short-term financial instruments.

How to Increase Cash Inflows

You can do this by boosting sales and bringing in more revenue for the company. To accomplish this, consider launching a new product, entering a new market, creating a promotion, or pushing sales targets.

If your business has credit sales, try to rely more on cash sales. For example, you can focus on the customers or products that are more likely to increase cash sales. A marketing message to attract cash sales can yield results, or you can offer a discount for cash sales. Discounts have the additional advantage of potentially turning credit purchases into cash sales.

Some businesses focus on credit sales and ignore debt collection. If customers do not pay on time, then they are putting your cash flow at risk. Your business should thus have strong credit risk policies in place that can identify unpaid customers and help you avoid them. If customers continuously delay payments, then your company should stop giving them credit.

Moreover, a bank balance can be used to earn interest. Rather than leaving the money alone, put it to work for you by investing in short-term instruments that pay interest.

How to Reduce Cash Outflows

Rather than paying cash for everything, you can try negotiating better payment terms with suppliers as well. The rule should apply to suppliers of raw materials, office supplies, and services. The idea here is to have money leave your business as late as possible.

If you have a credit facility, you must service it in accordance with its terms. If you do not, you risk losing your credit facility or having to pay fines, neither of which is ideal for your cash flow.
You can also reduce operational expenses, which will require a thorough examination of your entire organizational structure, culture, and operations. Through these results, you can identify efficiencies or cost-cutting measures that will make your money go further.

Sweet Tips from Ally:

If you manage your cash flow properly, your business will be able to continue operating even during difficult times. Get as much money into your business as possible, and then let it leave as slowly as possible.