Small businesses must consider the fact that revenue may not always come in exactly when you need it. Especially when you are running a small business, one deal falling through can have a significant effect on your available cash.
These tips can help get you through the months when you have a lot of expenses and not a lot of revenue.
Make a Plan for the Future
The most important of all cash flow strategies for small businesses is planning. It is impossible to know everything that will happen in the coming year, but there are sure to be revenues and expenses which you know are coming ahead of time. For example, if you have an annual subscription to a service, you know exactly when that payment will come due.
If you start planning well ahead of that payment date you can make sure you have enough cash on hand. Creating an anticipated cash flow statement for the coming weeks or months, or even for the entire coming year, is a helpful way to keep track of your cash flow.
Pay Bills With a Credit Card
Credit cards typically allow 30 days to make a payment after the statement closing date before interest begins to accrue. Since the statement periods themselves are also a month long, it means you can have close to two months to pay for an item that you charge to your credit card at the beginning of your statement period without paying a penny more for the extra time.
When you are looking to come up with financial strategies, this is a great option because it allows you to postpone making a payment while you wait for an expected incoming cash flow to materialize.
An added bonus of using credit cards is that they often have rewards programs which can save your business even more money.
When you use a cash-back credit card, you do more than just postpone when you have to pay; you also accrue rewards dollars which can be used to reduce your credit card bill in future months.
Eliminate Unnecessary Subscriptions
One of the most overlooked cash flow strategies is investing some effort up front to aggressively search for unnecessary subscription expenses and cut them. It can be very easy to sign up for free trials of tools that seem helpful but forget to cancel them once the team decides the tool is not useful.
You may have had to provide a credit card to start the trial and then auto-pay kicks in and you completely forget that you are paying a company hundreds of dollars a month for something that you do not use.
Even for tools that you are using, it can be extremely productive to evaluate whether or not the value you are getting from the tool is worth the cost.
Sometimes you might start using a tool but slowly use it less and less, while other times you might discover that you could get the same work done with only slightly more effort without the tool.
You could even discover that another tool exists which does everything you need at a lower price. Periodically re-evaluating the subscriptions you are paying for can be a major win for your cash flow.
Bring Cash in Sooner
If you provide a subscription service, offering a discount to customers for paying for multiple periods at once is a great way to bring in more money earlier.
This can really help you out in months when you have a lot of expenses since you have a big chunk of money sitting around which you received all at once which you would otherwise have had to collect in small bits over a longer period of time.
Even if you do not provide a subscription service, there are plenty of ways you can help bring money in faster. Consider whether your ordering process has inefficiencies.
If a customer cannot make an order without multiple emails back and forth with a sales representative, it can make collecting payment a difficult and slow process.
Save in Positive Months
Along with planning for the future, making sure to stash away the extra cash you earn in positive months is among the most important cash flow strategies for small businesses. When you have money saved up, having to pay a bit more than you earned in a given month is not the end of the world.
Small businesses have unpredictable cash flows and even the most successful small business is likely to have months where expenses exceed revenues and there is a slow season for their business.
Your cushion will help you weather the storm through rough patches and help you feel secure when you are doing well.
Get a Short-Term Loan
In some cases you may temporarily need some cash to cover short-term expenses. While using a credit card can help delay having to make a payment for a short time, a short-term loan can be an effective tool when you need more money than your credit card limit allows or when you are unable to pay the entire balance immediately and wish to avoid the extremely high interest rates associated with credit cards.
Short-term business loans will provide the infusion of cash you need for your immediate expenses while providing manageable terms for repayment (assuming you did your research and found a reputable and well-recommended lender). When you have more expenses than available cash, getting a loan is an effective way to make sure your bills get paid.
Running a Business Can Be a Challenge
Running a business is difficult and can come with a lot of unpredictability. These six cash flow strategies for small businesses can make a big difference for your business.
In order to make it through periods of unpredictable cash flow, remember to plan for the future, postpone outgoing cash flow by paying with a credit card, eliminate unnecessary subscriptions, accelerate incoming cash, save in months when you make extra money, and consider taking out a loan when you have more expenses than available cash.
Get tips and learn what to do to best manage your cash flow. Download the Contractor's Guide to Smart Cash Flow.
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