Are cash flow difficulties keeping you up at night?
You’re not alone.
Apparently, 7 out of 10 business owners struggle with cash flow problems. A recent survey also revealed that 66% of SME owners have already had to supplement their small businesses’ cash flow with personal funds.
But you shouldn’t have to get to this drastic stage!
Here are ten straightforward solutions to cash flow problems to help smooth out those financial speed bumps.
The best part? You can start implementing them today!
Let’s dive in:
Speedy Invoicing
Contrary to popular belief, most business owners don’t send out their invoices as promptly as they should. I recommend reviewing your invoicing routine to see if there are areas for improvement. Speedy invoicing is key to speedy payments!
Top Tip: Use invoicing software for automated invoice creation and auto-payments. Two of my favourites include GoCardless for recurring auto-payments and Xero for automatic invoicing.
Offer Varied Payment Options
I always recommend diversifying your payment options to speed up your cash flow. Different clients and customers may want to pay in different ways. This could include paying by PayPal, credit card or direct bank transfer.
Also, consider payment plans for those wanting to pay in smaller instalments. This can act as a great incentive to secure clients in the first place!
Top Tip: Integrate user-friendly payment gateways on your website or e-commerce platform to simplify and encourage immediate payment. For example, Shopify is fantastic for e-commerce brands.
Proactive Reminders
Instead of chasing payments after the due date, send out friendly reminders beforehand. A little friendly nudge can go a long way. You could even schedule time in your weekly diary for phone call reminders.
Top Tip: Set automated email or SMS reminders triggered a few days before the invoice due date.
Early Payment Perks
Incentivising those who pay promptly is a great way to resolve cash flow problems. However, you don’t always have to offer a discount – consider adding value with a bonus service or product.
Top Tip: Promote your bonus for early payments on your invoices, website, contracts and social channels.
Consider Factoring
Imagine you’ve done a job for someone, and they say, “Great job! I’ll pay you in 30 days.” But what if you need the money now?
This is where factoring comes in. Here’s how it works:
You Do the Job: You deliver your fantastic product or service and send your customer the invoice.
Bring in the Middleman: Instead of waiting for payment, you chat with a colleague (the factor) and say, “Hello, can you give me cash now for this invoice, and you can wait and collect payment from the client?”
Quick Cash: The factor says, “Yes!” and immediately gives you most of the invoice’s value. For example, if you invoiced £100, they might hand over £80 immediately.
They Wait, Not You: The factor waits for your customer to pay the full invoice. So, it’s their job to remind the customer and get the money.
Payment: Once your customer pays, the factor takes out a small fee for their service and gives you the rest of your money.
In short, factoring is like having a colleague willing to wait for payment so you don’t have to. Just remember, however, you’re sharing a slice of the pie (the fee) for their help!
Top Tip: Before opting for factoring, research and choose reputable financing companies that offer reasonable rates and transparent terms.
Embrace Collection Agencies
No one wants to get to this stage. However, the reality is that it’s a necessary process for many business owners with cash flow problems. Before you get started, ensure you have a robust debt collection process. Sometimes, a formal nudge from an agency can speed things along.
Top Tip: Regularly review outstanding payments and set a strict internal limit (e.g. 60 days overdue) before you involve a collection agency.
Delay Outgoing Payments
Consider having candid conversations with your trusted suppliers. They may accept extended payment plans if you have worked with them for a long time.
Top Tip: Maintain open communication with suppliers at all times, not just hard times. Instead of abruptly delaying payments, propose a revised payment schedule they might be comfortable with.
Renegotiate Supplier Agreements
Work dynamics change. Businesses evolve. Have your orders surged? Have you been using the same supplier for an extended period of time? Use this as leverage to revisit and negotiate terms with existing suppliers.
Top Tip: Analyse your purchasing trends, and if you see a consistent increase in order volume, present this data during your renegotiation discussions.
Credit-Check Your Prospects
Before diving into a business with a new client, do a quick credit check score on them. This due diligence will pay off in the long-term. It’s not stalking. It’s good business sense!
Top Tip: Sign up for a business credit monitoring service. Not only can you check potential partners, but you can also monitor your business’s credit health. I recommend Red Flag Alert which I used in my old business every now and then, especially when we took on a new client.
Contemplate Taking on Debt
While this sounds counterintuitive, taking on a strategic debt can sometimes help you manoeuvre out of a tight spot.
Top Tip: If considering a loan, shop around for lenders offering the best rates and flexible terms. Also, always draft a clear repayment plan.
It may seem daunting initially, but by systematically addressing each area with these solutions to cash flow problems, you’ll be on your way to financial stability in no time!
If it feels overwhelming, just pick two or three tips that resonate with you. Slot out some time in your calendar and set them in motion. Your future self will thank you for it!
If you need extra help with solutions for your cash flow problems, schedule a complimentary 30-minute profit growth session with me HERE.
