Cash flow can be a significant problem for many SMEs, as they try desperately to bridge the gap between outgoings and income. It takes valuable time to chase up unpaid client invoices, and you don’t want to upset suppliers or your staff by paying late. There are a few quick fixes to try for the New Year, but if cash flow is an ongoing issue then it’s a good idea to look at everything together and come up with a strategy.
Re-evaluate your invoice terms
Bring all of your incoming and outgoing invoices together to identify the problem. If customer payments don’t have to be made for 30 days, yet your supplier invoices need to be paid is 21 days, then you have nine days where you have to stay afloat on nothing. See if you can negotiate longer payment terms with your suppliers and give an incentive to clients who pay invoices early. You could go one step further and create penalties for late payments. This could bridge the gap and solve minor issues.
Increase your prices
An easy way to boost your revenue is to carry out a small price hike. If you have to invest in stock on a regular basis, a small increase can seriously improve cash flow. Of course customers are never happy with paying more, so only do this if you think the business can fend off competitors who may undercut you.
Use the business credit card
Pay for more products and services with a credit card, and you’ll get an extra 30 days to pay it off. If you’re waiting for a big payment to be transferred then this is a simple plan.
Hire an accountant
If you don’t already use the services of an accountant, now is the time for a positive investment. As financial experts they will be able to analyse cash flow and give advice for a better system which works for the business.
Apply for Finance
If you need a bigger solution to bridge an ever growing gap in cash flow, then you may need some extra help. A business loan might not be the answer, but there are a range of new ways to borrow which can instantly reduce the cash flow strain. Invoice finance and merchant cash advance solutions are perfect for helping businesses to keep running without getting into unmanageable debt.
Worried about cash flow? Talk to one of our financial advisors today.