Tips for Better Cash Flow Management


1. Know when to lease and know when to buy

Virtually all businesses need equipment, facilities, and property in order to operate; whether they should buy or lease those items is another question.

If your business is strapped for cash, you might want to consider leasing equipment and renting retail or office space rather than buying it outright. In addition to getting access to the materials and spaces your organization needs to be successful, when you choose to lease those items, you won’t have to tie up significant chunks of your capital. In other words, your business will be better positioned to respond to new opportunities and address unforeseen challenges.

Beyond that, when a business buys computers for its employees, for example, it owns them. While that might sound pleasing to the ear, it’s important to consider the speed at which technology evolves. Are you comfortable with your employees using four-year-old technology?

When businesses lease their computers, to continue the example, they’re also able to swap out old machines for new ones once contracts are fulfilled. So if your business is low on funds, you might want to look into lease financing instead of heading over to the bank to ask for a loan.

2. Make it a habit to shop around for better prices

How confident are you that you’re getting the best deals on your supplies, systems, and utilities?

While it’s probably counterproductive to shop around for new suppliers every other day, it might be worth reassessing your operations on a regular basis—whether that’s monthly, quarterly or even yearly will depend on the scope of your business.

In today’s competitive and connected marketplace, there certainly isn’t a shortage of businesses vying for your company’s dollars. But remember: it’s important not to pick new suppliers based on price alone. After all, if shipments don’t arrive on time or cloud computing assets aren’t always available, your business could very well take a hit.

So when shopping around for new suppliers, certainly look at price—that’s how you’ll solve your cash flow problems. But you need to consider a potential new vendor’s track record, too.

3. Bill on a more immediate basis

It’s not uncommon for businesses to wait until the end of the month to invoice their customers all at once. But common sense tells us that the longer you wait to send out invoices, the longer it’ll take for you to collect on them.

If you’re having cash flow problems, you might want to consider accelerating your billing process, sending out invoices the moment when jobs are complete and orders are shipped. In doing so, you ensure that your clients get their invoices faster—which hopefully means you’ll get paid quicker.

4. Focus on cash flow instead of profit

It’s true that many business owners open up their doors for the same underlying reason: to turn a profit. But chances are your business will have a considerably more difficult time realizing one if you’re constantly struggling to pay your bills.

Even if yours is the best business plan ever written, without access to the cash necessary to respond to new opportunities and meet your obligations, you might not get a chance to see your company reach its full potential. Instead, you could end up having to close down shop sooner than you expected.

For example, your business might generate a considerable amount of profit. But a good majority of that profit could be tied up in receivables, which doesn’t do you much good when it comes to you needing cash to cover your operating expenses.

But when you direct more focus on consistently maintaining a positive cash flow, the profits you seek will almost certainly follow.