As a new business owner, you might not have every business practice totally mastered. For example, your payroll process might need some retooling, and your POS system might benefit from a few upgrades. The most finicky of all your business practices ? and the one that new entrepreneurs most often get wrong ? is your cash flow: namely, balancing the money you are reinvesting into your business with your liquid assets to ensure a productive and profitable venture. Whether business is booming or you are barely getting by, you could have fundamental issues with your cash flow that could inhibit success.
Fortunately, fixing cash flow problems isn’t terribly difficult. Typically, it is only a matter of getting your hands on the cash that is already rightfully yours. Here are a few strategies that free up cash to help your business succeed.
Liquidate Inventory
The purpose of products is to make you money, so selling off your inventory isn’t a major deviation from what your business already does. First, you should try to rid yourself of excess inventory, either by returning unneeded product to your supplier or selling it to another business. If that’s not enough, you should liquidate the rest of your stock, hosting a major sale that is bound to attract customers from far and wide. To make less-popular items more attractive you might create product bundles or place them near the register to encourage impulse purchasing. The more you sell, the more cash you have.
Even if your business doesn’t have an inventory of products, you can modify this strategy to suit your needs. Organizing sales on your services should bring in new business, making good use of your equipment and earning you cash. Additionally, you can make deals with loyal customers, offering discounts if they pay for annual services in advance. Then, you can secure the cash you need to keep your business running. If worse comes to worst, you can sell spare equipment you use to perform your services, but that should be a last-ditch cash-earning scheme.
Factor Unpaid Invoices
A must-have service for most B2B businesses, invoice factoring allows you to obtain the money from your invoices faster and without the hassle of waiting for clients on slower-paying plans like net 60 or 90 pay up. Essentially, factoring companies buy your invoices, charging you a rate based on the creditworthiness of your clients. Factoring is not a loan, which means you don’t repay the cash at any time; in fact, factoring tends to provide you a higher percentage of the money you already earned than loans of any type, even accounts receivable loans.
However, you should be careful to do business only with a factoring company you can trust. Some factoring companies are secretive about fees and refuse to give rate quotes. If you don’t know how much it will cost to factor your invoices with a particular company, you should move on to one that is more honest and open.
Audit Your CAM
The common area maintenance (CAM) is most often referred to in lease agreements. CAM fees are levied by property owners to cover operating expenses like parking lot upkeep and landscaping. Often, CAM fees are charged by the square foot, and tenants pay their landlords without question.
However, an increasing number of tenants are finding that their landlords are less-than-scrupulous about accurate CAM calculations. There are regulations on CAM expenses charged by landlords, and investigations are revealing that some businesses are losing quite a lot of cash to devious property owners. However, before you can perform a CAM audit, you should check your lease agreement to ensure you are legally allowed to do so. You might need to hire a third party to get you the money your business needs.
Review Policies or Services
Undoubtedly, you have insurance payments every month and merchant services fees to wrestle with, as well as other regular expenses that are eating into your cash flow. If you can lower any or all the payments, you will get more cash in your pocket.
When it comes to insurance, experts suggest reviewing policies every six months ? or at least once per year. Business insurance needs change fast, which means you might not be covered in all the ways you should be. Ideally, you should find a broker that represents several companies, so you can quickly learn whether there is a better deal for you.
Additionally, if you process a high volume of card transactions, you might be able to lower your processing rates to keep more of your hard-earned cash. If your current merchant services provider is unwilling to drop fees or change your interest, you shouldn’t be afraid to look elsewhere.