Managing a small business comes with many financial responsibilities. From overseeing staff wages and logistical costs, to overheads and everyday expenses, you may find yourself increasingly busy.
So how can you stay on top of your cash flow when you have many duties to juggle? Consider these 3 tips.
1. Find quick financial wins
Some ways to improve your cash flow are relatively quick to apply to your business, including invoicing promptly and effectively. Ensure you clearly communicate your terms to your customers and follow up as soon as an invoice is outstanding. Some businesses also offer an incentive to their customers for early payment.
You should also review your payment terms with your suppliers to see if they can be extended. Consider pulling back on non-essential expenses. If you hold stock, for example, can you reduce the amount of inventory and still operate as effectively?
If you experience a temporary cash flow crunch, short-term financing options such as lines of credit or small business loans may help. These can provide the necessary funds to bridge the gap until your cash flow improves. It's essential to consult with a licensed financial advisor if you're considering these options.
2. Plan for the long term
Make sure your business plan is comprehensive and gives you clear direction for the future of your business.
It's important to develop a cash flow forecast and regularly monitor how your cash flow statement compares with your predictions. This will help you identify any variances and spot potential issues early on.
You should also regularly review your pricing to ensure it aligns with your costs and margins. Could your rent be too high? If so, are there options to renegotiate or even share your space with another business?
If you do not have an up-to-date business plan, developing one will be time well spent. It offers a way to measure your progress and identify what's working and what needs your attention.
3. Recognise the opportunities
It's important that you not only manage and mitigate the various challenges to your business’s cash flow, but also recognise opportunities to grow it in a changing economic climate.
You can access government support to find ways to pivot your offering, improve your digital readiness and adapt to changing consumer preferences. Doing so, you may see your cash flow improve.
The impact on cash flow varies across industries and individual businesses, so it's important to seek help if you're concerned or believe your business could improve in this area.
For more ways to improve your cash flow, read Tips for getting paid faster.
You can also search our online resources for practical tools on a range of topics to help you build your skills and make everyday business decisions with confidence.