There are many aspects of business that are complex. Is it better to grow quickly or take a more organic, slow-growth approach? Would it be better to fund a risk analysis and mitigation initiative or hire a new employee? These questions aren't easy ones to answer, as important as they might be. But there are some aspects of business that are pretty straightforward, and cash flow is one of them. If you're spending money faster than you're bringing it in, you're not going to have a positive cash flow.
And let's be clear…you need a positive cash flow.
If you're having trouble keeping your head above water in the cash department, or if you simply want to improve an already-rosy picture, read on for practical strategies for positive cash flow.
1. Get a deposit and establish milestones for long-term projects.
Whether you're a restaurant with a catering business or a graphic designer, it's great to land big projects with big paydays.
But when your work is spread out over weeks or months, it can be hard to continue paying your bills, especially if you have to defer other projects to finish your biggie.
A solution? Charge a deposit and establish milestones. Not only will a deposit ensure that your client isn't simply shopping you for price, but it'll make it easier to buy supplies or dedicate time to their job.
Bringing in money early in the project helps keep your cash flowing in.
2. Consider a discount for immediate payment.
For those of us who invoice for services or products, we're used to sending bills and waiting for the checks to trickle in. I've had great success in offering a modest discount for clients who can pay on the spot.
3. Raise your prices.
It may seem counterintuitive, but one of the best ways to keep a positive cash flow is to bring in more money.
If your industry is competitive and you're concerned about losing clients because of the increase, consider establishing new pricing for new clients and keeping old clients at the original level.
Alternatively, you could test out a price increase on just a few products or for just a few existing clients.
4. Offer premium or bundled services.
Another way to make your best clients even better is to offer them a premium product.
Consider bundling something that offers them added convenience or value. Increasing per-client spend can help boost your positive cash flow.
5. Create seasonal excitement.
I've learned that little spikes in sales can be enormously helpful in generating funds for my rainy day account or to finance special projects that intrigue me.
Positive cash flow depends in part on your ability to meet unexpected expenses. Building up that rainy day account or simply keeping a bigger buffer in your operating account can be a lifesaver. Periodic new product introductions or seasonal promotions can build that buffer.
6. Negotiate terms with vendors.
Revenue is only part of the cash flow equation. The other part is expenses.
I'm always surprised at how many business owners don't think to negotiate more advantageous terms or pricing from the people they buy from. You may have vendors who'd happily offer 30-day terms at no additional cost. You might be able to leverage your value to your vendor to obtain better quantity discounts. You might even be able to band together with other local companies to take advantage of bulk rates or delivery charges.
Positive cash flow is far easier to achieve if your expenses are lower or paid out slower.
7. Implement systems that improve productivity.
One of the most frequently overlooked ways to get to a positive cash flow is to improve productivity. Think about it: If you could accomplish more work with the staff you have, you could focus on bringing more revenue in!
Think about tasks in your business that have to be repeated over and over. How can you do them more efficiently? Whether it's client communications, processing returns or assembling widgets, when we streamline workflow, we're freeing up staff for other work.
A positive cash flow is important to the success of your business. Making sure you have money left over at the end of each month is the sign of a healthy company. It's what lets you grow. It enables you to support community causes that matter to you. It's what lets you continue to employ your staff and do good work.
Read more articles on cash flow.