In 2022, over 50% of small businesses reported cash flow as a reason for business hardship. Maintaining cash flow management, and monitoring outgoing expenses such as bills, salaries, and property costs can become overwhelming real fast. However, when done correctly, it can give you a big picture of your costs and revenue and ensure you have the funds needed to pay your bills while also making a profit. There are different strategies for improving on cash flow.
Inventory Management
Without the proper balance of managing inventory, it can easily overflow. If you order too much inventory, it’s sometimes not easy to make that money back. Likewise, if you order too little, then customers may go off to other competitors. Lots of businesses encounter seasonal fluctuations throughout the year, so it’s important as a business owner to account and book keep these changes, or else it can lead to negative cash flow.
Solution:
- Don’t buy more of what doesn’t sell. It’s easy to get emotional about the products we love, but it’s better to be objective. Attempt to get rid of it, even if it was to be at a discount
- Consider improving on an inventory management system
- Ideally, we keep inventory on hand for a short time before eventually selling.
- Maintaining accurate sales forecasting can help owners plan for seasonal changes in inventory
Business Loans
Taking out a small business loan can work wonders as an emergency fund – and it ensures daily cash flow to enhance any business venture. A Line of Credit is also a more straightforward and simple way to improve your cash flow, as you only borrow what you need. Idea Financial helps entrepreneurs achieve their business goals with ease.
Solution:
- Apply for a business loan or line of credit to ensure capital
- Review the Line of Credit terms and determine that it’s right for you
Consider Leasing Over Buying
For the long term, buying may seem more logical. But unless your company has excess cash and profits to rely on, then learning how to lease may be the better option. Ideally, we want to maintain cash flow for day-to-day operations.
Solution:
- Leasing will let you pay in small increments – which will ultimately help cash flow
- If you didn’t know, you can also write lease payments as business expenses and be written off on your taxes!
