4 tips to improve your business cash flow

It’s very common for a business to encounter a cash flow crunch.

Cash flow challenges can happen to a business when a customer pays late (or doesn’t pay at all), when an unexpected cost pops up, or when an anticipated sales deal falls through. When it happens, take a breath, and explore possible solutions—you’ve got this!

Consider these strategies to keep your business cash flowing.

1. Update your cash flow forecast and strategy

It’s helpful to pinpoint the amount of money coming in and out of your business for the next 12 months, so you can spot any shortfalls and take corrective action.

• Use your accounting software or a cash flow forecast template available online.
• Enter amounts expected from sales each month.
• Enter expenses you must pay each month.
• Look at the difference each month—is there more money going out than coming in? Play with the figures and timing to see if you can keep the balance in the positive.
• You can also approach a lender or investor to get access to the cash you need.
• If you anticipate a shortfall in an upcoming month, and you have time, you can try one of the strategies below to improve cash flow.

2. Speed up customer payments

How your customers pay, when they pay, and how you manage outstanding invoices will affect your cash flow. Try to speed up customer payments by:

• Asking for payment upfront.
• Accepting credit card payments and debit payments. There are plenty of options online, and modern accounting software programs feature a payments option.
• Invoicing right away, with short payment terms. Ask for payment in 10 days instead of 30.
• Staying on top of receivables—make it a habit to check the age of your receivables daily so you can take action.

Need a cash flow boost? Learn how in a free webinar from Sage Canada called ‘Strategies to improve your business cash flow’. Check out webinar details, date and time here.

3. Delay payables—without incurring late fees

Managing payables is just as important as collecting customer payments. Keep more money in your business for a longer time by:

• Negotiating a longer payment period with your suppliers.
• Paying a portion of an invoice now and paying the balance in 30 or 60 days. If you’re in a cash pinch, call the supplier to negotiate a payment schedule.
• Using a credit card to make payments. When used wisely, business credits cards can provide an effective short-term interest-free loan that can ease a temporary cash flow crunch.

4. Sell some inventory and look at your inventory management system

If much of your cash is tied up in inventory, it may be time to evaluate your current inventory management system.

• How often is your inventory turning over? Consider adjusting prices and reducing future re-stocking orders.
• Are you running out of best-selling items? It deprives your business of cash from sales.
• Get rid of stale inventory. Hold a sale to move old inventory so you can invest in stock that turns over more frequently.

Good quality accounting software can make inventory management easier.

By using accounting software to stay on top of your cash flow, you can help avoid a cash flow pinch and plan ahead with confidence.