If its India, its MSMEs Consider these six strategies on how to help improve cash flow in small business.
1. Use a software tool to stay on track.
Tracking your available cash and anticipated inflow and outflow of money throughout the month can be a vital step in managing your cash flow but it can be time-consuming for a busy business owner. You can make it easy for yourself by using one of the many online cash-flow management tools. You can do a search to find one that works best for your budget.
2. Expand payment options for customers.
When you examine how to improve cash flow in small business, you may want to focus on speeding up the process for customers to pay you. For one thing, you could offer more payment options by accepting credit cards, debit cards or automated clearing house (ACH) payments. Consider as well digital wallet or mobile payment solutions (like Google Pay, PayTM etc.).
3. Match receivables to payables.
An oft-forgotten aspect of how to improve cash flow for small business is to look at the payment terms for your suppliers and compare them to the payment terms for your customers. If you’re required to pay your suppliers within 30 days but you allow customers to pay within 45 or 60 days, you’re creating a gap in cash flow. When considering how to improve cash flow in small business, that’s an important area to focus on.
4. Consider factoring your unpaid invoices.
If your business is growing rapidly and you’re concerned about meeting your overheads, you may want to explore factoring your unpaid invoices as a potential, short-term solution to cash-flow problems. (The dictionary defines factoring as “the business of purchasing and collecting accounts receivable or of advancing cash on the basis of accounts receivable.”). Invoice factoring can help improve your cash flow and free up the working capital needed to run your business. As with any such financing transactions, be sure to seek professional advice to determine if this is a suitable option for your business.
5. Pick up the phone.
An overlooked aspect on how to improve cash flow in small business is the human touch. If you’ve sent email reminders or automated electronic reminders to customers whose invoices are past due without much success, consider picking up the phone and talking to them. A phone collection executive works wonders in many cases.
