Majority of small business owners view expansion as the end-all and be-all of their cash flow problems. But growing a business isn’t as easy as it sounds and doing so just to fix cash flow problems usually creates more issues. The most ideal and effective way to resolve issues with cash flow is to learn how to manage it more efficiently.
You can start by hiring an outsourced CFO or chief financial officer, who can offer you the same expert financial management services as a full-time CFO but minus the costs. Then, follow these tips:
Boost your repeat purchases
Acquiring new customers is crucial for any business, but you’ll need significant resources to do so, particularly for marketing. Instead, opt to sell more to the customers you already have and know since you already know what they want. You will only have to figure out how you can get them to buy more.
Be more stringent with your credit requirements
Research and check the references of prospective customers before extending credit to them. Better yet, have them complete a credit application. You can also consider accepting credit cards only, so you can be sure that you will be paid.
Consider offering discounted rates or promos to customers who pay earlier than expected and those who pay on time. Although this would affect your profit margin, it would significantly help you manage your cash flow because your customers would be encouraged to settle their invoices in advance due to the incentives.
Apply for the right loans
For short-term cash issues, you can take a loan from your bank. Opt for equity loans, revolving lines of credit, or an amortized loan with a long repayment period that already includes the principal and interest until the loan term ends.
Strive to grow your business, but don’t forget to plan for the resources you’ll need so that you’ll be prepared for a potential cash flow shortage should it ever occur. Also, get a better handle on things by tracking your cash flow outcomes every single month to see if what you’re doing is generating the kind of cash flow your business needs.