No small business owner has fun when prices begin to rise on literally everything. Whether you are shelling out 20% more for office paper or spending more on groceries, you start to notice a difference.
Here are five quick tips to boost your practice’s cash flow that does not include adding new revenue.
And as an added bonus, these tips are ones you can recycle for your small business clients, too.
1. Incentivize your customers
Now probably is not an ideal time to start throwing down the hammer when it comes to receivables collections. Remember that your clients might be tightly squeezed right now too, and when everyone is feeling better, you do not want to leave a bad taste in their mouths.
A more positive approach to receivables management right now is to offer savings to incentivize the behavior you want to see. Offer clients a small discount for setting up automatic payments or paying on time.
You also can offer clients a small discount for timely paying via check or ACH to avoid credit card fees which can cost over 3% in some cases.
2. Cut out unnecessary spending
I know this one seems obvious, but literally everything is a subscription model of billing these days. If you have become lax in tracking every dollar that’s spent, now is a good time to go through and figure out where to trim the fat.
Most likely, you are paying for some things consistently that you do not need. It also is a great place to start to make a list of necessary expenses that you may be able to negotiate prices on.
3. Check your own accounts payable terms
If there are incentives and deals, you are missing out on, see if you can build them into your cash flow schedule. If none of your vendors are offering any, call and see if you can negotiate with them.
To that end, do not pay bills early. If you have 30 days to pay, build your cash flow to include that lead time. The idea of maximizing cash flow is to incentivize money in as quickly as possible but slow the flow of how quickly it goes out.
Whatever strategy you decide to employ, building out a cash flow forecast for at least 90 to 120 days can help give you the best visibility into your business.
4. Renegotiate or consider lease terms
Whether it is a car or a copier, your lessor probably does not want to see you buy out of that and lose you as a customer. Call and ask if the terms can be negotiated to be more favorable to you long term.
Or just consider lease contracts instead of buying right now. You still get the benefits of depreciation in most cases without the cash outlay. Ask if you can extend the length of the lease in exchange for modifying payments to be a smaller chunk right now.
5. Leverage short-term debt, safely
This one can be challenging if not managed well so beware. Leveraging lines of credit or credit cards can help extend payment terms (see number 3) and if used effectively can be done without adding interest expense to your cash flow concerns.
Typically, lines of credit and credit cards give you 30 days to pay from the time that statements are issued before interest is charged to the balance owed. Consider paying bills with short-term debt solutions to give yourself an extra 30 days to pay, extending your cash outlay requirements to 60 days instead of 30.
Look also for the best cards on cash back for the things you frequently buy, like gasoline.
Whatever strategy you decide to employ, building out a cash flow forecast for at least 90 to 120 days can help give you the best visibility into your business. Looking ahead to plan for cash flow crunches gives you the best opportunity to avoid them altogether.
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