Top 10 Cash Flow Hacks Every Business Owner Should Know
A business’s cash flow is its lifeblood, so learning to manage it is an essential part of making sure it can run efficiently and stand out in the market.
As a business owner, you may want to consider investing in things like real estate. Or, you could sign up for affiliate marketing to get paid more cash for successful referrals to other products and services to boost passive income.
But if you want more ideas on how to maintain a good cash flow, keep reading to learn some extra cash flow hacks for your business.
1. Only Purchase Goods That Sell Well
Offering potential clients a lot of goods doesn’t necessarily mean more sales and income. For our first of many cash flow hacks, you could look into buying fast-moving goods.
Understand your sales pattern and know which of your products are the most in-demand and which are potentially less in demand.
When you do that, you can get more of the popular products from your suppliers and order less of what doesn’t sell much. This can possibly help improve your cash flow for a given season.
The same goes for services. If you notice certain services don’t generate a lot of income, it may be better to improve them or remove them from your offerings entirely.
To get a closer look at what your customers want, it costs nothing to ask them what services or products they’d pay for. Their feedback can also help you improve existing products and services.
2. Don’t Pay Bills Too Early
You may be thinking that it’s better to get your bills paid earlier since it’s another thing off your to-do list. However, doing so means you’ll have less cash on hand.
As such, it may be better for the business if you hold onto that cash for as long as possible. So, you may want to pay on the due date rather than earlier.
You can also use automation tools to schedule when you want to pay so all you have to do is ensure you have enough cash for your bills.
3. Offer Early Payment Discounts
An unusual idea for cash flow hacks is to offer discounts for early payments.
This can create a win-win situation where your customers get a better price, and your business potentially receives cash quicker.
Early payment discounts can also help prevent late payments since customers will typically also want to save money.
Of course, ensure that even with the discounts, you’re still receiving enough money to keep your business running.
4. Automate Customer Payment Collections
Using an invoicing system means you’ll still need to wait for payments — but setting up automatic payments like recurring credit card transfers can potentially make the process easier.
After all, it can take time to track and ask for payments yourself, but automation can make it faster.
Aside from that, you can also easily change payment terms, requiring either full or partial payment ahead of time.
5. Check The Cost Of Employee Health Plans
One of the things employers may not realise they’re spending a lot on is their employer-sponsored health plan.
Let’s say you’ve been operating for over a decade, and you haven’t closely inspected your current benefit strategies and health plans.
You may find that it’s burning a hole in your pocket!
Scrutinise your health plans and see if there are better alternatives available. You might end up saving more money than you first thought.
6. Stay On Top Of Your Monthly Expenses
Perhaps an obvious one among cash flow hacks is to track your monthly expenses.
That’s because expenses may seem reasonable if you look at them per day — especially if you’re typically looking at them alongside the active and passive income you’re receiving.
However, if you look at the bigger picture, you might realise that there are places your business can cut back.
To stay on top of your expenses, create a spreadsheet and input everything you spend money on. This makes it easier to analyse how much you’re spending and where.
7. Maintain An Emergency Fund
Among the other cash flow hacks, this may be the most important. After all, an emergency fund can be your cushion in case cash flow problems leave you strapped for cash.
Sudden cash flow issues may be difficult to predict and leave you unprepared. However, when they happen, emergency funds can help you weather the storm.
When creating your emergency fund, it should ideally be three months’ worth of money. Calculate how much you can afford to set aside per month and put it into your emergency funds.
8. Invoice Clients Often
It might be convenient for you to create batch invoices at the end of each month to make tracking your sales easier.
Unfortunately, this may delay payments since other businesses likely have their own AR/AP processes, which you can’t control.
As such, you may want to invoice customers at the completion of a work order or sale. Admittedly, you won’t get paid immediately, but at least the invoice enters their AR/AP process earlier.
It can function similarly to passive income in the sense that cash enters your business throughout the month whenever you get paid, without you having to chase after customers.
9. Look Into Grants For Small Businesses
Looking for grants is another good idea you may want to consider when thinking of cash flow hacks. Many organisations offer grants, which can greatly increase cash flow.
Prepare all the typically necessary documents, such as a business plan and financial statements and check each grant you’re applying for if they require other documents.
10. Update Your Cash Flow Projection
Creating and updating your cash flow projection regularly is important since it shows when you think you’ll be receiving and spending money.
As such, having an updated cash flow projection improves your ability to plan for the times when you might be strapped for cash.
For example, you might be able to look for more passive income streams — like real estate investments.
It also ensures you’re paying your suppliers on time.
Conclusion
Businesses can potentially boost their passive income to create a healthy cash flow.
These include potentially investing in real estate and trying peer-to-peer lending, where investors can earn interest on their loans.
However, there’s no harm in trying more cash flow hacks — your bank account might even benefit in the future.
