Keeping cash circulating through your business is essential not just with the long term in mind, but for your day-to-day business costs and to keep the lights on.
That can be easier said than done, however, with unexpected bills, late payments from customers and emergency expenditure.
Fortunately, you’re not powerless – there are some things you can do today to improve your cashflow.
Improve your invoicing system
Issuing invoices is typically how businesses get paid but it can sometimes feel as if your clients or customers haven’t received that memo. It can be incredibly frustrating when, as a result, late payments disrupt your cashflow.
First, though, are you doing everything you can at your end to ensure prompt payment? While we all know it’s important to send invoices out in good time, when they get put on the back burner during busy periods they’re sometimes sent late or not at all.
Dedicating some time to invoices or dealing with each as they come up will ensure that you give your clients plenty of time to pay.Â
If you’re being prompt with invoices, there’s also the chance that they’ll be responsive too and pay you on time.
It’s also worth reviewing your invoices to make sure they’re clear and complete. Don’t give people excuses to say they didn’t know what it was for or when it was due, or that they couldn’t work out how to pay.
If your efforts aren’t resulting in prompt payment, you know that the inefficiency isn’t at your end, in which case think about applying penalties for late payment or discounts for early ones.
Pay your suppliers less
Everything we’ve touched on with invoicing applies to your suppliers as much as it does to your own business. For example, you could offer early payments in exchange for discounts to improve your cashflow.
Buy in bulk as well, if that’s an option. Suppliers often give big discounts to businesses who buy from them in this way.
You could do this alone or as part of a community buying group, in which case you would find other like-minded businesses willing to pool their cash together when buying stock.
Not only does this make it easier to buy in bulk, but it can give you greater haggling power to get an even better deal with your suppliers.
Review your pricing strategy
A review of the prices of your goods or services would seem like a simple way to improve cashflow – increased prices means more income, right?
But of course, higher prices could just put off potential customers and drive existing ones to your competitors, especially if you’re in a particularly competitive market.
You will have already researched your competitor’s prices. Look again. Can you spot a range in prices in which you could manoeuvre to improve your cashflow?
If so, think long term. Lower prices and discounts on key products may result in a temporary cashflow constriction, but will also attract new customers who might buy other goods and services from you.
Sometimes, you might find yourself with too much stock and not enough cash. In that case, deals such as ‘two for the price of one’ can get people who might not have considered the product beforehand parting with their cash.Â
If marking up prices is justifiable for you, communicate this and your reasoning to your customers right away so they’ll be accepting of the change.
Review your prices regularly too, making small changes where appropriate so that nothing comes as too big a shock to your loyal customers.
Lease, don’t buy
This might seem counterintuitive for improving your cashflow, since leasing supplies, equipment and property typically ends up being more expensive than buying.
If you rent equipment, however, you spread the cost of its usage out in small increments over a longer period.
There’s also the advantage that if you need a particular piece of equipment only for a short while, you don’t have to fork out cash to buy the entire thing – and then have it cluttering up your premises
This is especially useful for equipment like laptops and mobile phones, the latest versions of which are used by most businesses, but which can be quite expensive and damaging to your cashflow.
Staying up to date with the most efficient and powerful technology also benefits a business’s day-to-day practices, so by leasing, you’ll have a convenient way of switching when the latest models come out.
Improve your marketing
One way to improve cashflow is to do more business. In turn, a good marketing strategy is the best way to drive people to your business, and nowadays, an online presence is a must.
Start with your website. Is it good enough to keep people interested? Does it communicate your ethos and reliability as a business?
Next, an SEO strategy will draw traffic to your website from people who are looking for the services you provide as long as your copy is search engine friendly.
Get on social media too. It’s a great way to connect with an audience in a professional but human way by answering questions and starting conversations there.
Populating your website with content such as blog posts is another great way to bring traffic in the same vein that email marketing campaigns will while positioning yourself as an expert in your field.
Testimonials and reviews from clients on your website will also boost your credibility and business image.
Not everything has to be online, though. Get involved in your community by donating prizes to local competitions and contests, host local events or volunteer for a charitable cause while representing your business.
Require more information?
If you’re interested in finding out more regarding our accounting services, please feel free to contact our friendly team at Rogers Spencer today!
Jo Moran
Jo Moran is a Chartered Accountant at Rogers Spencer and has been working with us since 2011. Jo specialises in Accountancy Solutions, Audits and Payroll Administration. Find out more about Jo here.