Cash flow is required to meet the daily needs of a business, such as purchasing supplies, procuring transport and paying bills and wages. But if net cash flow is negative, this could lead to borrowing, missed payments and eventually, the demise of a business. In fact, negative cash flow is one of the most common reasons for business failure.
There are lots of different things you can do to boost cash flow, such as renegotiate contracts with suppliers, re-evaluate prices of products and services or hire an accountant. But here are some other more innovative ways to help your business maintain a positive cash flow.
Outsourcing your company’s invoices can boost your cash flow. Invoice factoring is essentially a short-term loan. Your company’s invoices are sold to a third party, who usually release approximately 80% of the total invoice amount up front, with the remainder received after the invoice has been paid (minus fees). This immediately increases available cash flow, helping businesses to thrive.
Alternatively, you could bill your customers in advance. This does depend on the type of service or goods your business offers, but utilising a subscription service or requesting full or partial payment upfront could boost your company’s cash flow.
Not all business bank accounts are created equal, and some carry more charges than others. If your business bank account has high overdraft fees or has standard charges for transactions, then it might be a good idea to consider switching. Shop around to find the best low cost bank account for your business.
In 2016, the mobile overtook the desktop for the first time, as most people now choose to access the internet on the go from their phone. Similarly, social media use is continuing to grow worldwide. As a result, digital marketing has become vital to most businesses. While digital marketing campaigns can be expensive, you can advertise your business via social media for free. It is also one of the most effective ways to interact with customers and build your brand.
A word of warning: a credit card can help to boost your company’s cash flow if paid on time, but used incorrectly, can lead to debt problems. However, when used well, and if you secure a great opening offer, a credit card can boost cash flow. This is because many credit cards allow up to 21 days to make payment on purchases, providing your business with extra time to pay the bills.
Positive cash flow is vital to the health and survival of any business. While there are many reasons businesses fail, cash problems are the most common. To help protect your business, make sure to analyse patterns in company cash flow and try these innovative solutions to provide a cash injection.
By Zak Goldberg
Zak Goldberg is a Law & Business Graduate from the University of Leeds who has chosen to follow his aspirations of becoming a full-time published writer, offering his expertise on all areas of law, fintech and business economics.