6 Ways To Ensure Healthy Cash Flow In Your Small Business

Maintaining a healthy cash flow is one of the most important factors that can help you keep your small business running. Cash flow is a measure of how much money is coming in and going out of your company. 

As much as possible, avoid having a higher rate of payables versus your incoming receivables. This is called negative cash flow, and it’s bad for your business. It means that your expenses are greater than your earnings, and you won’t be able to cover them all with your sales alone. 

If this persists, your finances might be in grave danger. And this can lead to unwanted situations, such as debts. If you need help maintaining your cash flow, you may consult CPA Philadelphia or any reputable accounting and bookkeeping services near you. They’ll help you keep your finances in check and find ways to ensure positive cash flow. 

Another way is to get an education comparing the best CPA classes and doing your financial tasks yourself.

Alternatively, you could search for valuable information online. Once you have topics like ACH debit & credit cards explained to you in simple terms, you can make well-informed decisions.

In this article, you’ll discover some of the most effective strategies that can help you maintain a healthy cash flow in your small business. These include the following:

1. Merchant Cash Advance

A merchant cash advance is one of the most common ways that can help small businesses and startups improve their cash flow. This allows them to receive a small cash advance immediately without going through an arduous application and approval process. 

Significantly, a merchant cash advance is different from bank loans. When you apply for a merchant cash advance, you don’t need any collateral to grant your request. Instead, a lender will assess and verify your credit cards to determine the amount you need and can pay. 

After the verification process, you’ll need to sign a contract with them. The contract often includes the amount you’ll be getting and the interest you need to pay. Interest rates may vary from one company to another. 

2. Conduct Credit Checks

Before signing an agreement with your customers, conduct credit checks, especially if they don’t pay you in cash. Take a look into their accounts and see how they pay their debts. 

If they don’t have a good credit record, there’s a high possibility that you won’t receive payments on time. Even if you want to make a sale, it’s best to avoid offering your products or services to them. Doing so will only harm your cash flow and put it at risk.

However, if you have no choice, be sure to set a high interest rate to compensate for possible payment delays. This will encourage them to settle your invoices on time.

Offer Exclusive Deals And Discounts For Early Payments

Everyone loves being offered exclusive deals and discounts. Not only does it make your customers feel they’re special, but it also allows them to get more value for their money. For example, you may offer your customers a 10% discount if they can pay earlier than the due date.

In addition, you can also offer them an additional package if they can clear all their invoices from you before the due date. However, you need to set a date that would make your customers qualify for your incentive program. 

Significantly, make sure they understand the terms and conditions properly to avoid problems and misunderstandings. In addition, include this information on your invoices to inform customers and remind them of your incentive program.

Send Your Invoices As Early As Possible

If you want to replenish your cash flow quickly, send your invoices as soon as possible. This will help customers be reminded of their responsibilities to you. But when is the right time to send invoices?

As much as possible, it’s better to send your invoices right after you supply your customers with what they need. But before that, make sure you have the correct information to avoid having your invoice lost along the way. 

In addition, make your invoices clear and easy to understand. Use readable fonts and apply better font size. Also, ensure all the crucial details your customers need are present on the invoice. These include the due date, amount due, signatories, incentives, payment methods, and where to send the payment. 

Furthermore, don’t let heavy traffic slow down your invoice. Use an online invoice maker and turn every completed invoice into a PDF. Then, send it to your clients by email. On the other hand, make sure to wait for their acknowledgment to see if they’ve received it accordingly. Otherwise, you can call them to confirm whether or not they’ve received the invoice.

Get A High-Interest Savings Account

Getting a high-interest savings account is an easy way to boost your cash flow without doing anything. Look for a bank that offers high-interest rates compared to regular accounts. However, you might be required to secure a good amount of money to acquire a high-yielding account. But if it will boost your earnings, then why not?

Increase Your Prices

Increasing your prices is one of the most crucial strategies that will improve your cash flow. However, buyers who learn of a price increase are more likely to go elsewhere, so be careful with this approach. 

Nevertheless, a price increase is bound to happen since the prices of basic commodities continue to rise. What you can do is assess how your customers will react to it. Of course, most of them will try to ask you about your decision to raise your prices. Therefore, explain your reasons clearly and help them understand the situation of your business.

Final Words

Cash flow is one of the most important things to monitor when running a small business, considering a limited working capital and budget for expenses. Falling into the negative side will be perilous to your business. 

To ensure a healthy cash flow, it’s ideal to encourage your customers to settle their invoices as early as possible. In addition, you can run an incentive program to make them pay earlier than their due dates. And don’t forget to conduct credit checks for those who hesitate to pay in cash to ensure you’ll be paid promptly. Remember, if you can't pay your debts because of clients' late payments, it'll be a difficult situation for your company. You might need a debt relief program in Virginia or another city, which is doable but something to keep in mind when trying to maintain a healthy cash flow.