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4 Ways Small Businesses Can Increase Cash Flow

Posted by IBS Marketing on Aug 4, 2021 11:04:14 AM

A change in political winds. Fluctuating prices of commodities. Unpredictable markets. Many outside events have an impact on business, yet most are out of our control. This is why focusing on what your business can control -- cash flow -- is more important than ever.

Here are four ways to increase business cash flow, so you can be ready if and when the need arises:

Measure Cash Flow

The best way to manage cash flow is to measure it. This means not only measuring what happened in the past, but using data to predict what could happen in the future.

Successful businesses make cash flow projections for the next week, the next quarter, and the next year, so they always have a good idea of where they are headed. Keeping accurate cash flow projection data can also alert your business to a problem before it’s too late to turn things around.

While it’s true cash projections are not actual numbers, they provide educated guesses based on careful analysis of data. The longer businesses keep accurate data, the more accurately they can predict cash flow.

Where does a business derive their data? A business may use a variety of sources.  A typical start is by gathering feedback from the sales and customer service teams. Has the sales team been reporting good numbers for the quarter? That could mean a good projection for the year. Was this week’s webinar well attended? Factor those new leads into the quarter’s projections. The more data gathered from all business departments will reveal a more accurate, panoramic view of cash flow.

Another way to predict cash flow is to have a clear picture of upcoming cash outlays, or knowing when and where the money will go. Expenses, for the most part, are predictable: rent, inventory, equipment, salaries, wages & benefits, taxes, and so on, depending on the business.

While any guesswork, like budgeting, can be anxiety-inducing, it’s important to power through any discomfort and take a real, hard look at the numbers. Hiding from the facts and hoping for the best rarely works.

Expedite the Receivables Process

Managing receivables is an important component to available cash flow, and often a good place to review when there is an issue. How quickly your business gets paid for services and products provided will affect cash flow. Optimizing accounts receivable can increase cash flow — with little effort on your end.

Some questions to ask when examining your A/R department and processes are:

  • Are payment windows too long? If you give customers 15-30 days to make payment, consider shortening the window. With electronic transactions the norm, it’s okay to ask for payment upon receipt.
  • What is the communication workflow for invoices? Does your company provide ample notice for the invoice with alerts and reminders? Adding a few more messages to the communication workflow can remind customers when to pay. The more you can do to make busy customers’ lives easier, the faster you get paid.
  • Is credit given too freely? Too often businesses allow customers to use credit for goods and services — without conducting proper background checks first, and too often this leads to late or non-payments. Instead of risking slow or non-payments, require credit checks on all customers before issuing store credit.
  • Slow paying or non-paying customers? This one is easy. Simply refuse to do repeat business with problematic customers, or if you must, require that they pay cash.
  • Is the lag on your end? Now is the time to be honest. How quickly are you remitting invoices after the good or service is rendered? Often a lag in payments is due to a lag in billing. Speed up the process on your end by sending invoices as soon as possible.

Monitor Budget & Expenses

When business is booming, it’s easy to think you’ve made it. Too often, business owners get stuck in an abundance mindset when they see the sales numbers grow. However, this is exactly the time to tighten the belt, not the opposite! Because as business grows, so do business expenses.

Just as with a personal budget, always be examining areas that may be cut to prevent expense bloating. Balance business (and employee) needs when considering cuts, and be ruthless — yet practical.

How to cut business expenses if you need to tighten your budget:

  1. Consider waiting longer to make payments on expenses.
  2. Talk to vendors and suppliers (who have an interest in your success) about possible payment plans.
  3. Shop around for vendor discounts or more flexible payment terms, (but remember: you get what you pay for)
  4. Ask regular or trusted customers to expedite payments
  5. Consider selling off (or back) assets.

Consider Partnering with Interstate Billing Service

Interstate Billing Service, IBS, has emerged as an industry leader in managing commercial accounts receivable by providing unmatched customer service at competitive prices. 

IBS is a wholly-owned subsidiary of Bank Independent, a $2.1 billion community bank headquartered in Sheffield, Ala.  Founded in 1947, Bank Independent has grown to 29 locations with two operations centers.

Because of this funding source, IBS is fully capable of funding invoices for any size business. We serve locally-owned stand-alone operations as well as diverse companies managing multiple locations. 

The IBS A/R process is actually pretty simple:

  1. You Submit Your Invoices – You send copies of your customers' charged invoices to us daily, and we'll post the invoices to the customers' account(s).

  2. You Get Paid – We electronically deposit funds in your bank account each day for all of the customer invoices received, less the small discount fee that we've pre-negotiated with you.  

  3. Your Customers Receive Statements – At the end of each month, we send your customer one statement for all invoices due.  We apply payments, answer billing questions, work with you to resolve disputes, and pursue collections if necessary.

Interstate Billing Service eliminates the long turnaround time on your receivables, providing immediate cash flow to your business. And our team of experts provide full-service outsource accounts receivable management making your invoicing and collection worries a thing of the past.

How much would your business change with immediate cash flow?


Topics: Business Management

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