Your sales are healthy, so why are you having trouble paying the bills? It’s a common small business challenge — and often, the answer comes down to cash flow. Cash tends to come into businesses inconsistently, so even when sales are solid, you may not always have the money you need at any given moment.
Luckily, there are ways to give your cash influx a boost and steady the flow. Here are a few strategies to try.
Digitize and automate
Automating your accounts payable and accounts receivable can be a more efficient and even more accurate way to stay on top of when money is due in, when bills are due to be paid and whether customers are paying on time. Digitizing the invoice process can help expedite the invoice-to-payment process. These tactics may even reduce overhead expenses, which can also help cash flow.
Get paid faster
Checks are one of the slowest ways to move money from your customers to your accounts. So provide payment methods that put cash into your coffers faster. For instance, make it convenient for customers to pay at point of sale (whether in person or online) using credit cards, debit cards and digital wallets.
Get paid sooner
A sale is nice, but you can’t actually add (and use) the revenue until the invoice is paid. So why not try to get those invoices paid sooner? Consider offering a small discount — say, 3% or 5% — if a customer pays within 10 days instead of 30 or 60.
If you have ongoing customers who reliably pay every month, think about putting them on a retainer or an annual contract. Make it attractive by offering a loyalty discount. With any discounts, though, make sure to crunch the numbers to see if getting paid faster is worth getting paid a little less.
For larger projects, you might ask customers to pay a portion upfront, which can help cover upfront costs and provide a cash cushion. Similarly, for longer-term projects, ask for incremental payments as you complete major steps.
Have a back-up
Whether you have seasonal ups and downs or a fairly steady cash flow throughout the year, you’ll periodically need extra funds. You might need to fill a financial gap to meet payroll during a sales lull. Or you might want to take advantage of a great opportunity or pay for a large, unexpected expense, like an equipment breakdown.
In these cases, you want to have a financial backup plan. That could be a large cash reserve — ideally, placed in an interest-bearing business savings account that puts your money to work for you. Or it might mean having a business credit card or line of credit. For these last two options, it pays to apply in advance, so you don’t feel pressured to make a snap decision in a crisis.
Monitor and analyze
Online and mobile banking tools can make it easier to manage and track your accounts, allowing you to check current balances, view transactions, transfer funds and set up account alerts. Your accounting software may integrate with online banking for even greater convenience.
Don’t let unused equipment take up valuable floor space. Instead, see if you can add income by selling it. You can hold your own clearance sale, or look into third-party options such as online sale sites, trade associations or liquidators. You can also consider donating items to charity. This won’t give you income, but it may offer a tax break later. (Consult your tax advisor).
Get support when you need it
Every business is unique — and your cash flow issues may not be the same as your competitor’s. But taking time to understand how money moves in and out of your business — and taking measures to even out that cash flow — can help any business thrive.
Feel free to reach out to your partners at Hancock Whitney for additional insights and advice specific to your business. We offer a variety of solutions for small businesses, including our Preferred Business Checking account, which has many features to help you take more control of your cash flow. Click here to learn more.