Have you tried these 11 ways to improve cash flow in your business

Cash flow is critical to the success of your company. It refers to the flow of money within your firm. A healthy cash flow balance is when the account receivables are more than the account payables. Positive cash flow aids you in expanding your business, obtaining loans, making decisions, and more. However, for many businesses, maintaining a healthy cash flow is a struggle, mainly due to non-payment of dues by customers. A shortage of working capital, which is used to pay off daily/weekly/monthly overheads,  has the potential to bring several businesses to a screeching halt. Hence it’s very important to keep the cashflow going in any business. Are there any ways to ensure that? Yes, and that is exactly what we explain the blog below.
 
Here are a few ideas to assist any business in improving its cash flow situation.
 

How to Improve Cash Flow? 

 

1. Opt for an Overdraft Facility 

   Customers not paying on time is a common problem faced by business owners. So how do you cover your regular working capital expenses and make sure business does not come to a halt. The answer is an overdraft facility (OD). An OD comes in handy whenever the sudden need for funds arises in your business. This type of line of credit offers you great flexibility. The first is you can withdraw the funds anytime you want without going through lengthy documentation. Second, you will only have to pay interest on the amount withdrawn, not the sanctioned OD limit.
    
   Business overdrafts help you meet your short term requirements without touching your company's cash reserves. 
    

2. Choose invoice discounting or factoring

   This works perfectly when you have a lot of invoices in the system with pending payments. Invoice discounting works by converting your invoices into cash. This is a practice in which the company’s uses the unpaid receivables as the collateral  for a loan from a finance company. For businesses who need an urgent influx of capital, this method works great. Another reason why invoice discounting works is because money is released quickly There is also confidentiality maintained about the transaction, which is again a plus for small business owners.
    
   For understanding more, head over to our blog on “Why invoice discounting great way improve cash flow SMEs”.
    

3. Go for a Lease

   Leasing is a contract in which the lessor rents out its property to the lessee for a predefined time. You can save a considerable amount of money by leasing instead of buying outright. You can lease equipment, laptops, cars, furniture, and even an empty land or manufacturing plant.
    
   Let's use an example to illustrate this concept.
    
   Assume you require heavy machinery to raise your production capacity. That machinery costs about Rs. 50 lakhs. If you wish to purchase this, you must pay the entire amount upfront. If you want to finance it, you will need to put a down payment and pay interest on the loan amount.
    
   Whereas in the lease agreement, you can negotiate the rent based on the age and condition of the machinery. And, if you decide that the machine is no longer needed during any season or at any moment, you may return it to the owner.
    

4. Use Advanced Technologies

   Technology has aided businesses in a variety of ways. For example, it eliminates the need for labour in various jobs. It also aids your employees in completing several tasks with greater efficiency and effectiveness. Technology can help you optimise your workforce productivity and also reduce certain overheads. For eg, if you automate your invoicing process, you can keep track of your account receivables and payables, utility bill due dates, EMI due dates, and more. Automation allows you to pay your bills on time, saving you money on late fees and penalties.
    

5. Negotiate Payment Terms

   Never be afraid to bargain with your vendor for better conditions. Negotiate for cheaper pricing if you plan to buy raw materials in bulk. If you have a long-standing relationship with your supplier, you can ask for an extended credit period with no penalty. 
    

6. Avoid Unnecessary Spending

   One of the reasons for poor cash flow is needless spending. Stop accumulating stocks or making useless asset investments right away if you have a habit of doing so. These factors have a detrimental impact on your company's liquidity position. Moreover, it will also make it difficult for you to acquire business financing. The easiest way to keep track of this is budget allocation. Ask for estimates of annual expenses from your various departments. Strike out the things you think are irrelevant. You must also timely evaluate your employees' performance as salary payment is also a part of your spending.
    

Also Read: 5 Ways a Healthy Working Capital Flow Can Boost Your Business