Every business wants to increase its cash flow. The greater your cash flow, the more options you have for expansion and weathering slow periods throughout the year. Increasing sales is one way to increase cash flow, but there are other steps you can take to increase your cash right away.
Here’s how to increase cash flow in five steps.
1. Create Cash Flow Projections
If you want to increase your cash flow, you need to know where your cash flow is now and in the future. Cash flow projections can help you see how much cash your business will have in the future if you continue on your same path. In addition, having this information can help you determine what to focus on when increasing your cash flow (expenses, revenue, etc.).
Maybe you need to seek out a loan to avoid negative cash flow in the future or find new ways to increase sales.
If you don’t know how to calculate cash flow, you can use cash flow projection software to streamline this process and allow you to generate more accurate predictions.
2. Automate Tasks
One quick and straightforward way to increase cash flow is to automate tasks and processes. Automation can save you time and even help you avoid charges that negatively affect your cash flow. Additionally, you can use automation to save time and money on tasks.
Here are some ways automation can help increase cash flow:
- Many businesses are slow to send out invoices, and this can have a negative effect on cash flow. Instead of doing this process manually, set up automated invoicing for regular customers. This ensures that invoices are sent in a timely manner and that your business gets paid faster. Additionally, make sure that you’re making it easy for customers to pay by offering multiple and mobile payment options.
- When customers are late to pay invoices, chasing them down wastes time and resources. You can send automatic reminders for unpaid invoices to encourage customers to pay faster.
- To reduce the risk of late payments, set up automatic alerts for upcoming bills. Ensuring that you pay your bills on time will save you late fees and penalties that negatively affect your cash flow and reputation.
Find ways to automate as many tasks and processes as possible to save time and money while ensuring that bills are paid on time and customers are paying their invoices.
3. Monitor Your Projected And Actual Cash Flow
Cash flow projections are helpful, but only if they’re accurate. Regularly compare your projected and actual cash inflows and outflows, and make adjustments to your projections as needed.
Keep an eye on these numbers and base your decisions on the most up-to-date data you have on hand. Doing so can help you increase cash flow by making timely decisions based on what’s happening with your business right now.
4. Accelerate Cash Inflows
Another simple way to increase cash flow is to make it as quick and easy as possible for cash to get to your business.
If customers are paying on time and regularly, then you can reduce your reliance on credit cards and lines of credit to get through cash flow dips.
To accelerate cash inflows:
- Use accounting apps or software to generate invoices quickly and on-demand. The quicker customers receive an invoice for your products or services, the quicker the money will flow into your bank account.
- Use inventory management tools to optimize your inventory levels. Accurate inventory management can help you avoid having your cash tied up in products that are sitting in a warehouse. On the other hand, these tools can also help you avoid running out of inventory, so you can continue serving customers and generating revenue.
- Monitor your accounts receivable. Reach out to customers who haven’t paid their invoices. Consider whether it’s time to adjust your billing terms to ensure timely payments.
5. Slow Your Cash Outflows
Accelerating cash inflows will get money to your business more quickly. Conversely, slowing down your cash outflows will help ensure that more of that money stays within your business.
Make sure that bills are paid on time to avoid penalties. If a supplier offers a discount for early payments, take advantage of that. Otherwise, use the 30 days (or whatever billing terms are offered) to keep more cash in your business.
In addition to slowing your cash outflows, it’s important to look for ways to cut back on your expenses. Spending less will mean having more cash on hand.
If you are interested in even more business-related articles and information from us here at Bit Rebels, then we have a lot to choose from.