It isn’t enough to have great products and services to run a successful business. Without cash flow, you can’t keep the lights on to serve your customers. And when 82% of companies fail because of cash flow issues, it’s something that should always be on your mind.
With how vital cash flow management is for business, you need every strategy at your disposal to do it right. Use the four strategies below to make financial business planning easy.
Effective Cash Flow Management Strategies for Small Businesses
1. Create a Business Budget
It’s tempting to throw cash at everything possible when running a business. Everything looks like an opportunity, so you can develop tunnel vision and lose a lot of money.
You can manage operational costs and other things easier with a budget. Set aside a budget for expenses and try not to exceed those costs. This will help you keep money in the bank when you need it.
Of course, there may be exceptions if you find a great opportunity. However, try not to take too many chances when the benefit isn’t worth the risk.
2. Utilize a Credit Line
Even when you have a budget and cash reserves, that isn’t always enough to take advantage of opportunities. You may get presented with new partnerships and orders without the funds to take advantage. This is a significant impediment to business growth.
Getting a credit line will help you take advantage of those opportunities. You can use your credit line to fund orders and expand your business. Just be sure you can pay down your credit lines and avoid paying too much interest.
There are a lot of strategies for utilizing business credit, so make sure you learn more about the process.
3. Manage Unpaid Invoices
Even if you have a consumer business, the chances are good that you have business customers. This is especially true with product businesses. You sell wholesale to vendors for them to sell in physical stores.
In these cases, you probably invoice your customers on net terms. That means your customers have between 30 and 90 days to pay invoices.
Unfortunately, that doesn’t always happen. If you want to manage your income, stay on top of unpaid invoices to get paid what you’re owed.
4. Negotiate With Vendors
Vendors are a must for every business. Even small businesses need an internet connection and electricity to run. The problem is that those vendors are likely to raise your rates in the future.
You don’t have to accept those rate changes if you have other options. Reach out to your vendors to see if there’s any room to lower your rates.
If not, look at your other options and get quotes for services. You can drastically reduce your bills by negotiating these rates.
Don’t Take Cash Flow Management Lightly
It’s hard to run a business without cash reserves, so you need to do everything you can for the long-term financial success of your business. The cash flow management strategies above are a significant first step toward financial success. Keep improving your financial strategy until you optimize your company’s positive cash flow.
Head back to the blog if you want to read more business tips that will help your company continue growing.