How can small businesses improve cash flow?
Small businesses improve cash flow by reducing overhead, improving products or services, charging more, focusing on your best product, invoice strategy, and automating. Focus on creating more money and reducing expenses. Invoices should be streamlined and easy to pay.
Imagine, having more cash on hand for your small business. You don’t have to track down customers for payment because your invoices are already paid.
Small businesses can grow very quickly when you improve cash flow.
Luckily for you, I’m going to show you how you can improve your small businesses cash flow. I’ll give you a step-by-step checklist to make sure no opportunity is missed. With the right changes, your business can have more cash and scale without problem.
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How small businesses can improve cash flow
Small businesses can improve cash flow by reducing expenses, increasing income, and streamlining invoices. Stop paying for unnecessary expenses and make sure your product or service is reasonably priced. Additionally, make sure customers can pay you extremely easy and your invoicing process is streamlined.Click to Tweet! Please Share!Click To Tweet
Reduce overhead expenses
Your business needs to reduce unnecessary expenses. Pay less by negotiating existing expenses or eliminating low return on investment tasks.
For example, you may have been paying rent in a building for five years. You might be able to ask your landlord for a rent reduction for being a good client.
Are you ordering products or services which you could get cheaper elsewhere? The lower your cost of goods, employment costs, contractor fees, etc. the more money you’ll get to keep.
Evaluate your business for low return on investment tasks. What tasks are you or your employees performing that don’t directly relate to increase in income?
At the end of the day, you’ve got to focus on tasks that bring in or keep money. A small business has no room for ‘busy work’. Busy work simply keeps your employees looking busy all day, but doesn’t do anything for the company’s profits.
Stop trying to tweak the ‘look and feel’ of your company. Don’t mess around with useless forms or paper requests.
Identify the tasks that make you money and stick to them.
Improve your product or service
Your product or service is what brings in customers. You should always be asking yourself, “how can I add more value to my customers?”
Providing quality has a way of amplifying your business success. People are happy when you give good service and will recommend you to friends and family. The difference between a good product and a great product is repeat business from customers.
Maybe you own a pizza food truck. Your pizza might be good, so I might come back if I remember amongst all the other restaurants. However, what if you had the best pizza that I have ever tasted?
I’m going to single handedly keep you in business if you can consistently give me delicious pizza. Give me a free soda or breadsticks with my order with quick and friendly service and I might even share my experience on social media.
You can create more business by simply thinking about your customer. Make the best products and give the best experience around.
You know who makes great pizza? Pizza shop owners who are passionate about providing good pizza. When you have passion it shows in your work.
Charge more for your product or service
Another way to improve your business cash flow is the charge more for your products or services. Evaluate whatever it is you are selling or providing as a service. When compared to similar products or services, are others charging more?
Compare your product or service to the standard industry rates around your area. Are you under charging for your services?
Understand that it is okay to charge more for your services than some of your competitors. It is even more okay to charge more for your services if you are already busy.
Look at it this way. Let’s assume you are an HVAC repairman. Currently, you’re working from the moment you wake up to the moment you go to bed.
People are already willing to pay for your current services. Raise your prices by 10% and see if anybody even notices. Chances are nobody is going to notice or care as long as their HVAC system gets repaired on time.
At the very minimum, you’ll make the same amount of money and have less customers. At the end of the day, your customers can choose someone else to do business with if they don’t like the prices.
However, if you are already providing a quality service then you are more likely to make more money and stay busy.
Focus on your best product or service
Depending on your business, it may make sense for you to simply focus on your best product or service. Most individuals hate making a decision and by only offering one product or service takes away their hesitation to buy. In addition, you can turn all of your focus into the one product or service generating the majority of results.
Let’s assume that you’ve launched three different products. The first product results in generating 80% of your business, but the other two only make up 20%.
Chances are that you are spending the exact same amount of time promoting all three products. By dropping the other two products, you free up the majority of your time to promote your breadwinner.
Now, you are solely focused on promoting a successful product. You don’t have the burden of the other two products to hold you back. Scaling your product should now be much easier because you’re not wasting your time on the worst performers.
The faster you send your invoice the sooner you’ll get your cash. The best time to give an invoice is directly after you’ve performed your service. People are more likely to pay you on the spot if you are right there and willing to receive payment.
When you give me an invoice after you fixed my HVAC system I’m going to go inside and write you a check. I don’t want the burden of having to pay it later because the HVAC system is already on my mind.
I’m already in the process of watching you fix my HVAC system. I just want the problem done and over with so I can move on with my life.
So what happens when you send me an invoice in the mail?
First, you have to wait for the invoice to be printed and sent in the mail. You are relying on the fact that I’m checking my mail regularly. Whenever I do manage to get down to the mailbox, I probably set your invoice down somewhere.
About a week goes by before I remember that I have to pay this HVAC bill. Eventually, I will get to it before the due date.
Remember, the earlier you give the invoice to your customer, the faster you will get paid. I highly recommend giving it to your customer after you have completed the service.
Offer incentive for early or advanced payment
Nothing improves your cash flow better than providing an incentive to pay the invoice early or at time of service. I will gladly write you a check right now if you’re willing to take 10% off of my total bill.
Your dentist and doctor’s office does this all the time with cash payments. It is a complete hassle to bill through insurance, so they are willing to offer a cash payment discount. At the time of service in cash and receive a nice discount on the service.
Make paying you insanely easy
Nothing kills your cash flow quicker than making it hard for your customers to pay you. Respect your customer and understand that everyone is busy. I shouldn’t have to figure out when you are open to take my payment in order to give you your money.
Be honest with your billing system. How likely are you going to pay your own bill? Do you make it insanely easy to get paid or do you have a 5-step process before you get to the credit card payment?
The more you automate your systems, the less someone else has to worry and waste time doing. You essentially can use automation to eliminate low return on investment tasks.
So what are some of the things that you can use automation for?
Facebook chatbots can help automate customer service and get people the help they need. When people use Facebook chatbots they don’t even have to talk to a real person.
Bed and breakfasts can you use automation to book rooms and send confirmation emails. You can even send reminder emails about their upcoming stay and what to expect at check-in.
Online stores can you use automation to remind customers of abandoned carts and send discount codes to encourage checkout.
There are plenty of ways that automation can help your small business. However, each business is unique so take a look around and see what other businesses are doing to automate.Click to Tweet! Please Share!Click To Tweet
Summary: Improve cash flow for small business
As you can see, there are many ways to improve your cash flow as a small business. The goal is to reduce your expenses, increase your income, and have seamless invoicing. If you can do any one of those tasks then your cash flow should improve.
Examples of improving your cash flow include:
- Reducing overhead expenses
- Improve your product or service
- Charge more for your product or service
- Focusing on your best product or service
- Invoicing early
- Offer an incentive for early payment or advance payment
- Making paying you extremely easy
- Utilize automation tools
Take a look at your business. Which one of these can you implement to improve your cash flow?