Small business owners in nearly every industry struggle with cash flow and how to best utilize their working capital. Nearly 60% of failed businesses cite cash flow issues as a primary reason for their failure, which shows how cash flow management can make or break your business.
Here are four ways you can set your business up for cash flow success:
Better manage your inventory costs
Inventory can significantly sway your ability to stay on top of your cash flow because there are so many moving pieces to consider: Whether your business benefits from keeping inventory long-term or selling goods quickly, how much it costs to store and how much you can save by buying in larger quantities, are just a few considerations.
Regardless of the best inventory management strategy for your business, it is critical to keep a line of credit on hand to take advantage of the best deals from a vendor or ship items out quickly to maximize customer satisfaction.
Negotiate payment dates with your inventory suppliers to align with your known cash ins and outs so you know you will have cash on hand to make your payments on time.
Get paid faster
Late payments from customers can really hurt your ability to manage your business, yet they are all too common. Worst of all, late payments create gaps in cash flow which can affect your ability to keep your business moving.
It is important to make sure you are using the best practices to invoice promptly and thoroughly. Using an online tool can reduce room for human error by automating recurring invoices, ensuring you send a confirmation of receipt and track follow up.
Offering multiple, convenient ways to pay can reduce the payment cycle and improve your customer experience. With payment technology developing so quickly, you can find affordable payments solutions that help you accept payments in ways your customers like to pay, increasing the probability of more business and prompt payments.
Seek out same-day settlement options
Whether you’re borrowing or getting paid, new technologies allow small businesses to access the capital they need faster. FinTech companies are partnering with solutions such as INGO Money to receive loan funds immediately, allowing business owners to manage unforeseen expenses as they arise or on the weekends when typical bank transfers aren’t possible.
New solutions allow for same-date settlement of payments, too. Usually, business owners receiving credit card payments through customers would need to wait up to 72 hours for those funds to hit their accounts. Seek out solutions that offer same-day settlement to ensure you have access to the funds you earned sooner.
Refocus your time on your business, not your books
A study of 400 small business owners showed that more than 30% of businesses will seek investments in new technologies to improve productivity. Consider how a similar strategy could make an impact for your business. Every hour spent selling your products and working with customers instead of managing your books is another hour you can proactively increase sales for your company, and, effectively, your cash flow.
Most new technology solutions are focused on solving this issue while providing greater customer experiences than previously available in the market. New lending solutions give you an approval in minutes, payment solutions reduce the time to be paid and disbursements are now nearly immediate. All of that adds up to more time available to business owners to focus on doing what they love and selling.
Aditya Narula leads strategy and operations for card products at Kabbage. Kabbage is a data and technology company providing small businesses cash flow solutions, helping them access flexible funding in minutes with Kabbage Funding and get paid faster with Kabbage Payments. Since 2011, the company has helped more than 200,000 small businesses access more than $9 billion.