Improve Your Cashflow Management
Managing cashflow is highly important to the survival of your business. It’s easy to find yourself in a situation where a customer is a couple days late in paying, wages are due and things start to get a little tight. Here we make a few suggestions on how to alleviate cashflow problems and get back on track with your business management.
4 Tips to Boost Your Cashflow
- Reduce inventory and scrap old equipment
Is a lot of your money tied up in old slow-moving inventory and old equipment? Improve cash on hand with a one-time cash injection by selling off stagnant inventory and getting rid of obsolete equipment that is no longer required. Gumtree, ebay, or auction houses such as Grays or Pickles are great for this.
- Adjust your pricing model
Make sure to underline the value of your services or products to potential clients. Increasing prices will eventually lead to healthier cashflow, but only if customers still see value for what they receive for the price they pay. While this is a desirable outcome, you still have to wait for customers or clients to pay their invoices.
- Offer Incentives for Early Payment & Renegotiate Long Payment Terms
Offering a discount or other incentives to people or companies that pay early may help. But you should consider the message this sends to your customers about how you’d be happy to receive less for the same service, this really isn’t a great place to negotiate from. If you are beholden to a few large customers, and have been a valued supplier to them, you may be able to ask for more prompt payment in the future, although large Australia corporations are notorious for late payment.
- Investigate Alternative Financing Options
Sometimes you just need the cash. You’ve done the work, delivered the goods and can’t wait for your customers to pay. If your customers aren’t interested in early payment discounts (or you don’t want to implement them) and your cashflow management is still out of control, there are options like debtor financing that are readily available. This method involves selling your invoices to an investor in order to get the bulk of the money right away. While there are banks and large companies who do this, peer-to-peer cashflow financing is becoming more popular as it provides a cheaper and more flexible service.