If you’re like most business owners, you’re probably always on the lookout for ways to improve your cash flow. As studies have shown, this is especially true if you run a small business: only 38% of small businesses reported having a favorable cash flow in 2011. And according to a U.S. bank survey, 82% of small businesses that fail ultimately do so because of cash flow problems. But regardless of your company’s size, it’s likely that this is a chief concern. Fortunately, there are a number of simple ways to improve your cash flow without a whole lot of effort. Below, you’ll find just a few.
- Cut out unnecessary expenses
First of all, you should get rid of any waste within your business. If you were too quick to bring on new hires or are spending more money to handle certain needs yourself, you need to re-evaluate a bit. If you handle your print mail in house, for instance, you may be spending more than you should on equipment maintenance and material purchases. Compare the cost of outsourcing these needs and see whether it might be financially beneficial to make the switch.
- Look at your utilities
Are you paying a lot for your HVAC and electricity? It’s possible you could save more by switching to a high-efficiency system and by instating a company-wide conservation policy. Make your employees aware of how important it is to turn off the lights at the end of the day and to recycle whenever possible (it actually costs less to recycle than to have your garbage picked up!). You may even be able to renegotiate your insurance, rent, or internet service for a better deal. While having these amenities is a must for your daily operations, you may be paying more for them than you need to be.
- Switch to electronic billing services
If you’re still sending out paper invoices, you’re missing out on a huge opportunity to get paid faster. One study found that half of customers paid an electronic invoice before the paper bill would have even arrived in the mail, and nearly one-fifth paid their e-bill the same day they received it. That means that electronic invoicing can make a colossal difference in your cash flow. You can even provide small incentives to your customers to pay their electronic bills early or institute a late fee to ensure the system works for you. Finally, electronic billing services can allow you to offer recurring billing to your ongoing customers, which makes invoicing and payment even more convenient for everyone.
- Don’t pay your bills too early
As a business owner, you’ll want your customers to pay early (or on time, at the very least). But it’ll usually behoove you to wait until your own bills are due to pay them. When you don’t owe payment immediately, you have more freedom with your cash flow if you wait. Of course, if you’re taking advantage of another company’s electronic billing services, you should give yourself a few days to ensure your payment is processed. And if they provide worthwhile incentives to pay early, there’s nothing wrong with taking advantage. But most of the time, there’s no need to disrupt your own cash flow by paying invoices too soon.
By taking a close look at your own expenditures and exploring options that are both economically sound and environmentally friendly, you’ll likely be able to speed up your receivables and improve your monthly cash flow without making undue sacrifices. In the end, these decisions will mean that your business will be more likely to financially succeed and satisfy both employees and customers.