Five strategies for improving cash flow in your business

 

 

 

Being in business is all about keeping cash flowing through your business, hence the term ‘cash flow’. No matter how profitable your product is, unless cash is coming in as regularly as money flows out, your business won’t survive.  

Here are five areas you can look at to improve your cash flow.

 

 

Offer alternative pricing models 

 

Setting the right pricing for your product can be challenging. You don’t want to price too low, as it could make you look cheap, but at the same time, price too high and customer won’t be able to afford you. However, even if you believe you’ve got it just right, there are things you can do to boost revenue further by adapting your sales/pricing model.  

Depending on your offerings, some customers might require a different type of product, or prefer to pay in a different way, by monthly subscription, for instance. By giving your customers different payment options – such as pre-payments, fixed monthly or specific date payments, you have more visibility over your cash flow.  

It’s up to you to decide how you can do that depending on your range of products or services. 

 

 

Early payments vs late payments 

 

Another way you can use payments to improve cash flow is by creating incentives for customers to pay on time, in advance or even by deposit. Likewise, you can create financial penalties for those that pay late.  

Applying a discount for customers that pay on time can help your budget and forecast more accurately, and, of course, keeps money coming in regularly to keep the business ticking over smoothly. An added bonus is when customers pay on time, you spend less time and money on credit control. 

 

 

Invoice on time 

 

Just as important as credit control is making sure invoices go out promptly. The sooner the invoice goes out, the sooner it will get paid (or if it doesn’t, credit control can get on the job sooner).  

It’s a good idea to invest in a system that automates it for you, so the invoice gets sent with the goods or when the job is complete. After all, any technology that makes it easier for you to manage your business finances, get paid and manage cash flow can help you free up time and resources. Research what’s out there that meets the needs of your business. 

 

 

Lease instead of buying 

 

Old equipment can let you down, failing into disrepair or becoming dated and unfit for purpose. Expensive, unexpected repairs and replacements can seriously affect your cash flow if you don’t have a sinking fund for such emergencies. One alternative is to consider leasing some of the equipment you need to do business. By doing so, you know exactly how much your operating costs are each month and you won’t have a nasty surprise when it comes to replacing an essential piece of equipment. What’s more, most leasing companies will let you upgrade as necessary, so you can stay up to date and work more efficiently with the most modern business equipment.  

 

 

Optimise your cash flow 

 

Once you start to focus on improving cash flow, you’ll quickly see the difference it can make and will want to do moreOne way of doing this is by creating a cash flow forecast that allows you to plan for the year ahead. This type of budget will help you plan for big expenses such as new equipment, the rise and fall of business associated with seasonal demand and ensure the cash is there to meet your tax liabilities when that dreaded time of year comes round. It can even predict when you may need to look for additional funding.  

If you are experiencing cash flow problems, it might be time to step back and look at your business objectively, where things are going wrong and where you can make alterations by putting some of these tips into action. By doing so, you should see significant improvements in a relatively short timeframe. 

Why startups should make payments a priority

 

 

 

Starting up a business is a complex undertaking. It can also be unpredictable. You can only do so much to plan ahead, but protecting your finances gives you a better chance of dealing with the unexpected. Which is why cash flow is so important, especially for startups.  

When you realise that nearly half of all startups fail within the first five years, you can see just how important it is to keep a steady stream of payments coming in from customers in a timely fashion. 

 

 

Get cash flowing into your business 

 

Getting a business up-and-running can be an exciting time. Understandably, many entrepreneurs feel pressured to focus on their product or service in order to make it as attractive as possible and maximise sales. But, as a result, the importance of setting up good processes to handle the payments for those sales is sometimes neglected.  

And that’s a big mistake!  

Your cash flow has to cover all of your expenses for each month and if payments aren’t coming in, or being processed fast enough, it falls behind. It’s then, when your business can start running into trouble.  

Which is why startups must focus on every element of the payment process to optimise cashflow. At this stage, it’s not all about profit – it’s about not running out of cash, as the business is finding its feet. So it’s vital to ensure that your cashflow projections are realistic from the outset. Achieving that means having the right payments strategy in place. 

 

 

Technology is the best friend of startups 

 

The key to getting this right today is technology. Older payment systems used by traditional banks can be slow, bureaucratic and cumbersome. New ones, such as KoalaPays, have been designed to be fast, efficient and flexible.  

With KoalaPays, you can manage your finances in a way that works for you with our dedicated business bank accounts. They are user-friendly and allow you to quickly convert currencies, transfer funds and be in control of your money. It’s equipped with comprehensive reporting tools, payroll function, shared users feature and much more. 

Furthermore, our business accounts and services are evolving all the time. We’re always looking to add value for our business customers by making our systems compatible with your own and packed with features and functionalities that make it easier for you to do business. A good example of this is our separate accounts for each currency. This makes it much easier to keep costs low when taking overseas payments in different currencies.  

 

 

Stay on top of credit control 

 

At the heart of any good payments strategy is a strong credit control function. Set realistic credit limits, make sure your customers are clear on due dates and, above all, insist that invoices are paid in a timely manner. If necessary, introduce penalties for late payments. If you’re at all unsure about a new customer or business partner, carry out a credit check.  

One of the most useful advantages of new technology is that most of the processes dealing with the collection of payments can be automated, so you spend less time dealing with payments and more time focussing on sales.  

With the right payments strategy, you can take the effort out of credit control, get paid faster and streamline all your payment mechanisms. Once all those fall into line, you can focus on your core business and grow your profitability.  

Talk to a representative at KoalaPays for more advice on getting the right payments platform set up for your needs.  

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