Cash flow issues are very common for businesses, especially smaller ones that are just getting started. Sometimes it has to do with poor sales, but in many cases, it’s an issue of poor management or using the wrong approaches. Business owners often have a certain view of how things should be done and internalise false principles that end up stifling their cash flow. This is why you will need to look at your whole operation and processes if you want to improve them and be ready to make some fundamental changes. Here are some of the ways small businesses can optimise their cash flow in 2022.
Don’t Buy, Lease
One of the biggest mistakes small business owners make is assuming that they have to buy the latest and greatest equipment or have to buy equipment at all. If you’re a new business, buying equipment will be a big hit on your cash flow, and there are better options out there. You could lease equipment instead and get all the benefits of new machinery without the cash flow hit. Not only that, but you won’t have to worry about what you’re going to do once your equipment reaches its end of life. You’ll often get a servicing deal as part of the lease as well, so you won’t have to think about sudden repairs.
Use Alternate Financing Methods
New small businesses usually don’t have great credit because they haven’t had the time to build a credit history. This is why you may need to consider looking for alternative financing options if cash flow is getting low. One of the ways you could access credit would be to give up something as collateral. This could be personal property or some of your business’s assets. These can include everything from real estate, to equipment, and even inventory in some cases.
Another option would be to apply for invoice financing. With invoice financing, you can borrow money against invoices that are due to you at a later date. In this case, it’s your debtor’s credit score that will be the main determinant of whether you can get the loan or not.
There’s also a third option you can try if both your personal and business credit are in bad shape, you have nothing to put up as collateral, and you can’t qualify for invoice financing. If you still have your day job, then you could always look at payday loans. Brokers like Payday UK can connect you with a panel of lenders who specialise in Pay Day Loans. All you’ll need to do is fill a simple form and compare offers. Depending on your situation, you could get a loan ranging from £50 and £5000 which could be repaid in three to 36 months.
Lower Your Overheads
You should also look at your operation and see where you could trim some fat. One of the areas where many businesses overpay is when it comes to electricity. If you haven’t tried negotiating better rates with your current energy provider and you’ve been with them for a while, you should talk to them right away and see if you can get your rates to go down.
If they refuse to give you a better deal, know that you have options. There are over 85 energy suppliers in this country and plenty of services that will allow you to compare prices between providers and even allow you to switch right on the spot, so take advantage of the competition.
Another thing you should try is negotiating your rent. This is usually one of the biggest expenses for businesses, and you’d be surprised at how lenient landlords can be if you’re a steady payer. Tell them that you’re experiencing issues and that it’s only temporary. They will usually prefer working out a better deal with you than having to go through the trouble of finding new tenants who may not be as good as you.
Streamline Your Invoicing Process
Your customers can’t pay you until they get your invoice, so send them as soon as possible and consider automating the process. You should also consider incentivising clients to pay quicker by offering discounts if it doesn’t affect your margins too much. If you have a 30-day term on your invoices, many of your customers would be more than happy to pay within a week if it means that they’ll get a discount. So, test the idea and see how much of an improvement it makes on your cash flow.
As you can see, there are tons of different ways that you can improve cash flow in your business if you’re experiencing issues. Take the time to see what you may be doing wrong and pay more attention to limiting waste within your organisation.