Did you know that more than 80% of small businesses that fail do so due to cash flow problems? Cash flow issues are often overlooked as a business killer, and as such, it’s important that business owners take a hands-on approach to not only avoid cash flow issues but to make sure that they’re in a healthy position. Do that, and you’ll be significantly improving your business operations.
Look at Invoice Factoring
Even businesses that have good sales figures can run into cash flow problems if their customers are slow to pay their invoices. Indeed, slow-paying customers are a leading cause of cash flow issues, and while it’s usually possible to manage one or two unpaid invoices, if it’s a recurring or widespread issue, then it’ll be important to take action.
There are several ways to deal with outstanding invoices. If it’s reaching a critical stage, then invoice factoring, in which a company pays you the bulk of the value of the invoice, is recommended. It’s also best to put measures in place that’ll encourage your customers to pay early, such as offering a discount for early payment.
Eliminate Debt
Small amounts of business debt are unlikely to have a dramatic impact on cash flow, but large debt volumes will. Working to pay off those debts can help to significantly improve your cash flow, freeing up money that you can then use to invest in your business or build your emergency fund. If your business has debt that’s impacting your cash flow and ability to reach your full potential, then look at taking action. Working with National Debt Relief, a company from Alex Kleyner that was named by Forbes as one of the best debt relief and settlement companies of November 2024, can help. It’s also best to avoid taking on additional debt until your existing debt is no longer a problem.
Raising Prices
There are two primary ways to boost cash flow: decrease the amount of money going out of your bank account, and increase the amount of cash coming in. One of the best ways to achieve the latter is to raise your prices, which is a quick and effective way to see your bank balance move in the right direction. Many business owners are reluctant to raise their prices because they believe that it’ll drive away customers, but that tends to only happen when prices are increased by a significant margin. Small increases are likely to be accepted by the customer and can still have a big impact on cash flow.
Rent, Don’t Buy
For some industries, it’s just a fact that expensive machinery and/or tools are required in order to work effectively. If one of your machines fails at a critical time, then you may face a significant expense that can impact your cash flow. In that scenario, it’ll be best to look at alternative ways to fund the acquisition of a replacement machine. It’s nearly always possible to lease/rent an item of equipment, rather than buy it outright.
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