Tips to Improve Your Cash Flow

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Improving cash flow is always worth your time and can eliminate a lot of stress that accompanies being a business owner.  One way to better define cash needs is to divide your cash into separate categories – long-term and short-term expenditures.

The short-term category is for cash you require to pay expenses over the next 12 months. The long-term category  is for cash you need to pay expenses in that are due long term.

Beyond just being able to pay recurring monthly bills, there are several reasons why having a reasonable amount of cash set aside is crucial for your business.

  • Better liquidity. By having a substantial amount of cash set aside, a business can take advantage of unexpected growth opportunities or get through a surprise reduction of revenue.

  • Cash flow interruptions.  Substantial levels of cash can be used to carry you through delays in receiving client payments or handling supply chain interruptions.

  • Pay suppliers on time. Waiting as long as possible to pay a vendor may seem like a good idea for improving short-term cash flow, but vendors who are paid on time may be more  flexible when it comes to pricing and extended payment terms.

  • Keep small expenses under control. It’s easy to ignore small expenses. However,  these incidental costs can add up quickly. Audit these expenses at least once per year and cancel services that are no longer needed.

  • Keep inventory moving. The longer inventory sits on a warehouse shelf, the more time you’ll have to wait before you can turn that piece of inventory into cash. You also run the risk of the inventory left on your shelves becoming obsolete.   Concentrate on not carrying inventory that will be on your shelves longer than 6 months.

  • Maintain a great relationship with your banker. A short-term loan or line of credit is one way to handle an unexpected cash shortfall. Of course, you need to qualify for the line of credit first. A good business relationship with your banker can help you get emergency cash if needed.

Improving your cash flow can be more difficult than it appears. We would love to help you brainstorm ideas for improving your business’s cash flow.  616-802-4212