“There’s lots of things that can be solved with cash.”- Danny Boyle
One of the issues hitting small businesses hardest these days is how to improve cash flow. The reason is obvious; cash flow is the lifeblood of business. One of the most overused but true clichés is “cash is king.” It’s true. Nobody knows this more than the American government! (However this is not what this blog post is about)
From our many years of experience working with small business owners like yourself, we can provide a few tips on how to improve cash flow in your business in these uncertain times.
- Utilize the Goodwill You Have with Suppliers
This is one of the most common sources of financing that you probably didn’t even realize you have available. Trade credit is a source of financing you receive when you purchase from vendors. Since you’ve already been using this for a while and have created relationships with certain vendors, they are (usually) going to be sympathetic if you need some extra time to pay them. If you haven’t done so before, be sure to contact the vendor and let them know your situation and ask for more favorable terms. Most realize it’s in their best interest to be flexible (better to wait rather than you to go belly up and risk not getting anything) and will accommodate you, as long as the time you ask for is reasonable!
- State Business and Industrial Development Corporations (SBIDCs)
Did you know there are state funds that lend money to small businesses? Each state has its own requirements regarding risk and capital terms. Contact your local chamber of commerce for details.
- Small Business Development Centers (SBDCs)
The U.S. Small Business Administration offers assistance in many areas, including lending. For details go to http://www.sba.gov/content/small-business-development-centers-sbdcs
- Commercial Finance Companies
As an alternative to the bank you can go to a commercial finance company for loans on working capital and inventory. The disadvantages are these loans usually have a high interest rate and collateral is usually required. But if you’re in a cash crunch they are worth looking into.
- Is Your Accounts Receivable Procedure Effective?
This point addresses one of the possible causes of your cash flow problem. There are a number of ways to get customers to pay sooner. One way is to offer a small discount if they pay before 30 days, such as “2%/10, net 30”. This means they get a 2% discount if they pay within 10 days, otherwise they are to pay the entire invoice amount within 30 days. You could also change the wording on your invoices. For example, instead of showing the terms as “payment terms 30 days” be specific and say “please pay by August 31, 2013” as an example.
- Recruit Your Customers for Help
You’ve provided outstanding service to them in the past, but have you asked for referrals? It’s never a good idea to assume that if someone is happy with their service from you that they are automatically going to send you referrals. Give a few of your best customers a call and/or send a card asking for referrals. From personal experience, we can tell you that past or current customers are one of the BEST sources of new business. Don’t miss this opportunity!
Take action on one or a few of these 6 tips today and you will be in a better cash flow position tomorrow. If you need a plan of action or perhaps a sounding board for your ideas, contact us today. We have helped many small businesses in Arizona to achieve the results they want.
Has this post on how to improve cash flow given you some valuable information? Share the wealth now by giving a “like” or posting it on LinkedIn using the links below!
Subscribe to our newsletter for business building tips straight to your inbox!