2018-08-03 00:10:07Finance and Accounting: Cash FlowEnglishhttps://quickbooks.intuit.com/in/resources/in_qrc/uploads/2018/08/Small-business-owners-research-how-to-improve-cash-flow.jpghttps://quickbooks.intuit.com/in/resources/finance-and-accounting-cash-flow/improve-cash-flow/3 Tips for Improving Your Cash Flow

3 Tips for Improving Your Cash Flow

3 min read

Monitoring your company’s cash flow and taking steps to improve it empowers you to better run your business. Besides being an essential part of financial reporting, recognizing how much liquid cash you have available makes it possible to make important business decisions such as how much inventory you can afford to order, or if you can afford to hire a new employee.

Making changes to boost your cash flow is a natural part of continually expanding your company over time, and it’s often a slow-but-steady process. Ideally, your cash flow should grow organically as sales and profits increase. However, sometimes being proactive is necessary for faster results, and having that extra liquidity to work with during slow periods can aid in the long-term growth process.

Take Out a Loan

If you need funding for day-to-day business operations, you may want to consider a working capital loan. Depending on the nature of the loan, you may need to offer banks some sort of collateral, but some lending institutions do offer collateral-free loans, so do a little research beforehand to find something that fits your needs and financial situation.

On average, capital loans typically last six months to a year, so they can be very helpful during a slow period. For example, if your company sells seasonal products, and you continue manufacturing products during the off season, you might want to get a loan to help you maintain cash flow and lower overhead during the off season while sales are slow. Then, you can pay off the loan with your profits from your peak season when sales increase.

Invoice Overdue Customers

If you have customers with outstanding debt, it may be time to send them a friendly reminder that payments are due. Additionally, you may want to consider running a credit check on new customers before offering flexible payment plans. If a customer isn’t paying up front in cash, there’s always a chance that you may not get paid fully down the line. QuickBooks Online comes with fantastic invoicing tools that make the process fast and hassle-free. In fact, you can even schedule recurring invoices to handle everything for you automatically.

Raise Your Prices

Finding the elusive perfect price for your products or services can be tough. After you all, you want to make a nice profit, but at the same time you want to attract customers too. Depending on the nature of your business, you may want to consider raising your prices.

Say you sell high-end jewelry. Raising your prices slightly probably wouldn’t drastically affect a customer’s perception of your product or its price — you’re still most likely going to get the sale. At the same time, that extra money can go a long way in reducing overhead expenses. Another example is if you sell low-priced items in high quantities — office supplies, for instance. Raising the cost a few rupees per unit sold may not bother your customers, but that extra profit can go towards improving your cash flow.

The bottom line is that if you want to improve cash flow, you need to take steps to reduce spending and increase profits. As long as you’re actively seeking out and implementing ways to save money while also keeping your profits steady, you should be able to improve your cash flow over time. Taking out a loan, invoicing customers, and raising your prices can all help you improve cash flow relatively quickly, but don’t forget to think about the big picture too. Every rupee saved is a rupee that can be used to grow your cash flow, so try to be frugal whenever possible. Once frugality becomes a habit, your cash flow grows naturally.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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