Before diving into cash flow strategies, let me say that there is a difference between cash flow and cash management.
Cash management means that you’re managing cash that comes into your business. In concept, it’s like the old-school envelope method of allotting one “envelope” for specific expenses.
Cash flow, on the other hand, is managing the time between cashing in and cashing out. When a business says they have a cash flow issue, they won’t have issues with expenses and budgets, but when they pay and when their business gets paid. The problem comes in when there is not enough cash coming in to pay for the business’s expenses, which it should pay at a set time. Eventually, we’ll need to look into cash management which often is the core of the problem.
But today, we will be talking about cash flow strategies and how we can overcome cash flow problems.
Here are ten simple cash flow strategies you can adapt right now:
Right now, you may be paying suppliers upon receiving the item or the invoice, but try asking your supplier for better and extended credit terms. If you have worked together for a while and maintain a good relationship with them, you can expect your credit term to be extended over time. However, you have to remember that you need to set aside a part of your cash when it comes in and pay the credit on the day that you have to. The worst that can happen when you ask is for them to say no, and you are going back to the same credit terms, so negotiate and ask for it.
Getting paid faster.
Ideally, we want our clients to pay in advance or on time by debit or standing order. If you can develop a system for your business, then that is the holy grail of getting paid. While this is entirely impossible for some industries, don’t discount this method just yet.
For example, most clients were used to paying every time a service is fulfilled or delivered in the service industry. These days, clients need to pay a fixed monthly rate for the service they are using. While it may be a challenge to educate your clients, don’t discount this method because no one does it yet. Nowadays, industries are changing how they get paid and getting paid faster to get rid of cash flow issues in the business.
Offering discounts on early invoice settlements.
If you’re finding it challenging to encourage clients to pay you early, you may offer them discounts for early settlements. For example, if there is nothing you can do about your payment terms which are 30 days, you can offer a 5% discount instead if they pay within seven days. Doing this will eventually encourage them to pay faster, bringing in more cash to your business.
Reselling to old clients or customers.
The people on your database, your current or old clients, are ten times more likely to buy from you. If you haven’t been in regular contact with them, maybe they forgot about you. A special discount or offer for them, with payment terms favourable to you, will make them feel valued and encourage them to buy from you again. Naturally, this will generate cash for your business.
Asking for referrals.
If you’ve provided valuable products or services to your past or current clients, ask them to refer or recommend people who are like them and whom they think will benefit from what you offer as much as they have. It is just a friendly recommendation—not sales-y and not pressured. All you’re asking is if they know someone who will enjoy the service you provided and if they can connect you to them.
Raising your prices.
The fact is that most business owners are not charging nearly enough for the excellent services and incredible value they provide their clients. Most services and products are priced lower or within the industry’s standard rates. Raising your prices should be something you need to revisit now and then because only 10% of buyers make a decision solely based on pricing—even during a recession.
You can start by adding value to your services that your competitors aren’t offering to raise your prices. You can also consider raising your rates for existing clients instead of making it across the board. Make it your goal for your prospects to have a difficult time comparing you with competitors because your pricing and services are on a different level from them.
Offering discounted coaching sessions.
If you need the cash now, encourage people to come in by offering discounted coaching sessions. It is a great strategy to get an influx of cash into the business and also a great opportunity for people to work with you. However, make sure you don’t sound desperate because that turns people off and sends them the wrong energy that you’re just begging them for cash. Encourage people to come in through limited slots and limited-time offers.
Announcing raised prices after a certain period of time.
This leads back to your strategy of raising your business’s rate but allowing people to get locked in now at your current rates. This will bring an influx of clients to your business and generate more cash for you. However, make sure that the old rates are still profitable for you before you make this offer.
Offering a VIP option for your service.
On average, when you offer a higher standard of service, we see back 20% of people who are ready for the upgrade. If you offer an upgrade to your current customers, you will likely see 20% of people ready for a higher level of service.
Identifying money leaks.
If you have cash flow issues, you have to make sure they’re not linked to cash management issues. With this, you have to review your expenses and eradicate money that goes into places that they shouldn’t be going to in the first place. Identifying money leaks is simply evaluating whether an expense is 100% necessary to keep the lights on or if they’re delivering a positive return to your business. If you have money leaks, you need to get rid of them and get rid of them as soon as possible.
Summing up Cash Flow Strategies
If you have more questions about cash flow strategies to adopt for your business, feel free to get in touch with Annette & Co. Better yet, tune in to our upcoming workshop The Wealth Lab. I will be your coach, and I will walk you through some business resource and money life hacks that you may find helpful to your business, so be sure to check it out! Don’t forget to follow us on Instagram as well.