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If you own a business that is performing well and growing steadily, it’s a sign that your business is successful. However, that doesn’t mean you have to grow complacent. Many successful businesses can still be hit with many cash flow issues even in the growth stage. About 82% of businesses fail due to a poor understanding of cash flow management. To keep your business afloat, you need to treat your cash flow with the utmost care. By optimizing your business’ cash flow, you can boost its revenues, meet your targets with quick turnaround times, and lower your operation costs. Here are seven ways you can improve your cash flow to keep your business going strong

1. Plan for future cash needs

Keeping your accounting records timely and accurate allows you to properly anticipate or forecast cash flow for your business based on the data you’ve gathered over time. Most accounting experts recommend that businesses should review their cash flow every month. When it comes to your cash flow, it always helps to take a proactive approach, as that would help you have an idea of the state of your business’ finances and properly prepare for tough financial seasons. For example, if your accounting records show that you will need extra cash in the future, you can start talking to credit facilities or lenders about taking out bridge loans to help secure the way for future funding. 

2. Choose to lease over buying

When it comes to investing in an asset for your business, one of the most important questions you must ask yourself is if you have to buy the asset. Cost is a major factor in purchasing assets, and it does affect your cash flow, especially when it hasn’t been planned for or you spend over your budget. But sometimes, you don’t always have to buy. Over the past couple of years, other alternatives such as leasing have become more popular for businesses. For example, if it’s time for your business to purchase a new fleet of cars, you can opt for a short-term fleet leasing option instead of buying outright and allowing your cash flow to take a hit. 

It’s true that leasing your supplies, equipment, and other assets might be more expensive over time. However, unless your company has a lot of cash, it’s always better to maintain a stable cash stream for your daily operations. You get to pay in smaller increments when you lease, improving your cash flow system. 

3. Outsourcing 

When running a business, it’s natural to want to have the best team assembled to ensure that your daily operations run smoothly and that you reach your business goals. However, you do not necessarily need to hire full-time workers for every vacant position in your company. Hiring and retaining an employee costs a lot of money. Instead, you can evaluate your current business needs and identify areas that might be more cost-friendly to outsource. Most functions like human resources, accounting, marketing, and IT management are some of the positions that can be outsourced. There are many firms that are experts in providing experienced professionals to handle certain business tasks and duties.

Outsourcing is a great way to save money and have a more flexible staff. It’s also an excellent way to increase your business’ efficiency, as you are paying for expert services at a much lower cost. 

4. Renegotiate long-term contracts

Almost every business needs to have a wide range of tools and services to keep it running smoothly. You would have to build healthy working relationships with suppliers and other service providers. But while these services help keep your business afloat, the expenses can quickly add up. Therefore, ensure you evaluate what services you need for your business and remove any others you can do without. You can also seek alternative prices from other suppliers or service providers. However, if you have an existing relationship with other services, you can renegotiate your contracts. You can approach them with a more cost-effective business arrangement that is a win-win for both parties. 

Many other businesses might be willing to work with you if they know they can keep you as a customer for many years. However, not all providers will be willing to change any contracts. You must also pay attention to the add-ons or additional services they provide. If you do not need them, you can take them out to reduce your costs. 

5. Develop rewards and penalties for early and late payments

Many businesses loathe invoicing because it involves a lot of back-and-forth communication. If you struggle to hold your customers accountable and find it difficult to follow up when they default on any payments, you can implement a reward and penalty program. For example, you can offer discounts to clients that make timely payments and add interest charges to any invoices that haven’t been paid. This strategy will push your clients to pay you as early as possible, effectively improving your cash flow system. You will also save more time and resources because you no longer have to chase your clients to pay for your services. Ensure that you include this information on all your invoices and contracts so that your clients are taken by surprise. 

6. Reevaluate the pricing of your products

When running your business, you might struggle a bit with your pricing. How do you price your products or services to attract customers and meet your revenue goals? It’s easy to assume that increasing your prices would turn your customers away. But it’s better to test that hypothesis before concluding. You can test and determine how much your market is willing to pay for your product or service. 

Pricing too low will not only affect your cash flow but your business might not be taken seriously. You also have to try not to place a price too high. So, what’s the solution to this dilemma? It would be best to find a moderate price that is the perfect balance between these two extremes. It’s a lot of work, but finding the perfect price will help boost your cash flow and make it easier to generate more income and revenue. 

7. Control access to your business bank accounts

If you want to have a steady cash flow, you must protect your assets. The best way to reduce your risk of fraud or any unauthorized access to your company’s bank accounts is by ensuring that there are proper checks in place. One of the first things you have to do is keep the number of people who have access to these accounts at a minimum. You can give certain company employees, and external service providers access to your accounts at the right levels, and it should be determined by their function and if they would work directly with that account. You can also designate the right people, including yourself, as authorized signatories who will sign checks and other financial documents on behalf of your business. 

You must also secure your IT systems, update your passwords regularly, protect your debit and credit card information, as well as use one computer solely for your banking purposes. 

When you implement these key tips in your cash flow management processes, you will easily and quickly learn how to safeguard your company’s finances and increase your cash flow, making your business operations run smoothly and efficiently. Ensure that you also consult your business plan regularly to help you forecast any trends or challenges before they affect your cash flow.