Cash flow is frequently cited as one of the most significant concerns for entrepreneurs and small business owners. Cash management is important to the success of any organization. Even if a business is profitable, without capital, it might fail in a couple of weeks.

More cash allows you to expand your business, team, inventory, and locations. More income also gives you more power, allowing you to make strategic movements, negotiate more effectively, and be proactive rather than reactive. More cash will really improve your profitability. Most importantly, having more money lessens stress.

When it comes to controlling cash flow, there are a few main ways to enhance cash management in the long run:

1. Anticipate and Plan for Future Cash Needs

Keeping accurate, timely, and relevant (ART) accounting records allows you to build a forecast for your business based on historical results. At the very least, businesses should be reviewing their cash flow monthly.

Being proactive with your cash flow enables you to forecast your anticipated funds and help prepare for historically painful periods or seasonal trends.

For example, if you find that you are anticipating a future need for extra cash, you may want to start talking to lenders about a bridge loan to help pave the way for future financing. Similarly, if you can anticipate large expenses ahead of payout, you’ll be able to plan your other obligations accordingly to avoid cash flow surprises.

2. Improve your Accounts Receivable

By actively managing your accounts receivable, you can stay on top of outstanding invoices and decrease the time it takes to get paid.

One way you can do this is by encouraging customers to pay early. For example, if your payment terms are net 30 days, consider offering a slight discount for customers paying net 10 days.

Are you currently waiting for the checks to arrive? Offering a variety of payment options will make it as easy as possible for a customer to pay you, such ACH or credit card payments. While these options may come with processing fees, getting money faster is better for your business if cash flow is tight and eliminates time & labor spent on collection. These options can help prevent you from stacking up credit card debt to cover expenses.

3. Manage your Accounts Payable Process

Establishing and organizing your accounts payable process will be essential to improving your company’s cash flow. If your accounting department doesn’t already use software to help manage your accounts, it is a good idea to invest in one. Next, you should communicate with your team which invoices are most important so they can be paid first. Remember, do not let unpaid invoices slip through the cracks.

Another tip? Try to get to know your vendors and extend payment terms as long as possible. Most vendors will ask businesses for net 30, but once you build up a positive relationship, they may be more inclined to offer net 45 or net 60. After all, the longer you have to pay, the more time you have to get money in. You can use a simple payment agreement template to help you when creating your financial contracts.

4. Put Idle Cash to Work 

Another way to improve business cash flow is by putting idle cash to work. Your idle cash is money that is not earning any income.

Chances are if you have large balances sitting in non-interest-bearing accounts, you can find a better place for them to live. You could consider moving them to an interest-bearing account that may earn .5% or 1% APY. Another option is to invest the money in expanding your business, use it to decrease your debts and lower your interest payments, invest in new technology, or prepay some expenses.

5. Utilize a Sweep Account

Most commercial banks offer a sweep account, a type of account to help maximize earnings on your income by automatically transferring money from your business checking account to your savings account. The sweeps happen at the close of business each day, and you can set the amount, typically in $500 increments.

Should your checking account dip below your minimum requirement, the funds will be automatically transferred back into your checking account to cover the outlay. This risk-free option makes it easy to build your savings for a rainy day or your next major investment.

6. Utilize Cheap and/or Free Financing Options

If you are looking to invest in your company through low to medium-cost purchases such as upgrading your computer system, buying new furniture, or replacing your company vehicles, you should take advantage of financing options that have low or no interest for the initial period of the loan.

Using this strategy for a business loan will help you save money by cushioning the cash hit to your business. If you pay off the full loan upfront before the interest rates kick in, you will save even more, therefore, making the most of your investment.

7. Control Access to Bank Accounts

To maintain positive cash flow, it is crucial to protect your assets. The best way to eliminate fraud and unauthorized use of your company bank accounts is to make sure the proper safeguards are in place.

Common safeguards include keeping the number of people who can access these accounts to a minimum, securing your IT infrastructure, frequently updating passwords, protecting your credit and debit card information and bank accounts, and using a dedicated computer for banking.

8. Outsource Certain Business Functions

It’s not necessary to hire full-time employees for every business function. You should evaluate your business needs and identify areas where it may be more cost-effective to outsource. IT management, human resources, accounting, payroll, and marketing are all functions that could be outsourced.

Read Also: Navigating the Finances: A Comprehensive Guide to Computer Repair Business

There are many firms, including Signature Analytics, that specialize in providing experienced professionals to handle specific business functions and manage cash flow issues. Outsourcing can save your business money, offers a flexible staffing model during the ebbs and flows of your business cycle, and it can also increase your efficiency.

9. Renegotiate Existing Service Contracts

Another tip to increase business cash flow is to review service plans and contracts regularly. Start by looking at your internet, phone bills, copiers, software support, and janitorial/building maintenance contracts to pinpoint opportunities to save.

Improved technologies and increased market competition have driven prices down on many services, so it’s worth taking the time to shop around for a better deal.

10. Maintain a Weekly Rolling Cash Forecast

A rolling cash forecast is a good practice for improving cash flow overall. You don’t need expensive programs to do this; Excel will easily allow you to project a weekly rolling cash forecast. You should include all estimated inflows, such as customer receipts, and outflows, such as vendor payments and payroll. Record this data on a weekly basis at least.

Your rolling cash forecast will help you plan staffing needs, commit to new vendors, and ensure funds will always be available to make payroll and vendor payments. As a bonus, your forecasting will help you estimate and understand your company’s sales cycle.

How Can I Maximize my Cash Flow?

Every organization may benefit from an increase in cash flow. More money in the bank equals more opportunity to hire more people, expand operations, invest in new products and services, and, ultimately, grow your company. The aim is to get your cash flow moving more efficiently, giving you the freedom to invest.

Here are six simple business tactics that will boost your cash flow and put you on the fast track to greater earnings.

1. Reduce your spending.

Decreasing your spending is one of the more obvious ways to increase your cash flow. Of course, this is easier said than done. But even a few minor reductions can result in major returns.

The first step to implementing this strategy is to carefully analyze all of your spending. How much do your office supplies and electrical bills cost every month? How much do you pay for insurance, employee salaries, and other bills? After analyzing your spending, look for areas that can be reduced. However, it’s important to approach spending cuts carefully, because pay cuts can result in driving away employees.

2. Create additional revenue streams.

One smart way to tap into a new revenue stream and increase cash flow is Central Bank’s Commercial Payments solution. This powerful and automated Accounts Payable (AP) system will streamline your current payment process into a faster, more efficient payment system that requires less management — saving you more money and time. And because Commercial Payments is credit card based, Central Bank will pay you a revenue share, or cash back, on every dollar of digital payments processed through the system.

3. Offer discounts for fast payments.

If you’re looking for a way to encourage your customers to pay their invoices or bills faster to increase your cash flow, then fast pay discounts may help. The discount doesn’t have to be substantial, but customers will appreciate a small amount of savings if they pay within 30 days or less. Try several incentive plans, with different discount levels, to reach more clients and collect payments faster. Also, making it easier for customers to pay will increase the well-being of your business. Consider a payments and invoicing solution, like Autobooks, to streamline your payment acceptance.

You can also approach your vendors and offer this same incentive when you pay them faster through Central Bank’s Commercial Payments automated payment system. Be sure to explore this opportunity to negotiate a discount incentive by paying your vendor sooner, or even before the due date.

4. Watch your inventory.

Are you investing a large portion of your cash into inventory? Inventory may be the lifeline of your business, but you don’t want it to destroy your cash flow. The boxes of shirts, candles, or other items you sell shouldn’t sit in warehouses for decades. It’s important to find a balance between having too much and too little of inventory, find the fine line that is just enough to satisfy your customers’ needs.

5. Consider raising your prices.

Are you keeping up with inflation? You might be able to raise prices on your products and services to keep up with the market. Higher prices can lead to more cash flow, but they may also scare away customers. Find the happy medium that fulfills your cash flow needs, but also stays within a prince range that keeps your customers happy and loyal.

6. Offer prepayment rewards.

By offering a variety of rewards ranging from discounts to extra products, you can incentivize your customers to prepay a portion, or their entire bill, upfront. You can also create a special rewards program with gift cards or other items. Customers who prepay for large packages, services, or multiple items could receive extra rewards. These rewards will encourage them to stay and continue buying your products or services.

Cash is King in every business. And cash flow is your company’s lifeblood. So creating a customer rewards program that increases cash flow is always a smart idea. By offering sales, discounts, and other special rewards, you can expand your customer base and gain loyalty to your business. Plus automating and streamlining your current AP process with Central Bank’s Commercial Payments solution can make it even easier. Incorporate several of these strategies into your business operations to discover what works best for you.

How do you Generate Cash Flow With Little Money?

Entrepreneurs frequently struggle to continue their firms. It is not uncommon for entrepreneurs to suffer with cash flow management, which is the misery of their existence. Problems develop when they are unable to control their financial flow.

One approach to overcome this is to generate passive income through low-effort sources such as investments, royalties, and licensing fees. Passive revenue sources can assist entrepreneurs ensure that their enterprises have a steady source of funding in the long run.

There are numerous ways to generate passive income. You can choose from a variety of passive income enterprises that will give you with the highest passive income and allow you to earn money while sleeping.

1. Create and Sell Digital Products

This is a passive income strategy that you can use to generate a substantial amount of revenue. The method of creating and selling digital products is relatively simple. All you need is to produce content in the form of an eBook, video, or another type of media that your audience will find useful and want to purchase.

Once you’ve created your product, you can upload it to sites like Amazon Kindle Direct Publishing or Udemy for sale. As soon as someone purchases the product from one of the sites, you make money. You can also use cash flow software to gain maximum benefits.

Another way to create and sell digital products is through your website. For example, you can write an eBook and use Google AdSense or other ad networks to display ads on your website. The ad revenue generated from the click-throughs will provide you with passive income so long as the site remains active and receives traffic.

2. Create a blog or YouTube channel

Similar to creating and selling digital products, you can also create content-based websites that generate revenue automatically. It is one of the best cash flow investments. For instance, if you have a popular YouTube channel or blog where you publish videos about movie reviews or tutorials, all of the views and ad revenue generated from the site will accumulate with each new video post.

If you can potentially generate enough traffic to your site, you’ll have the potential to receive an income every month just by showing advertisements on your site. Moreover, if you have any trouble with cash flow management, you can take the help of financial software.

3. Subscription-based business

Another good passive income strategy that generates revenue is a subscription-based service. This type of business focuses on providing a service to the public, and the service cost is paid on a monthly or annual basis. Take, for example, a gym membership. As long as you have a price point that will attract customers, you’ll generate revenue from your customer’s monthly payments.

4. Get Paid For Referring Leads

This passive income strategy is becoming more and more popular. It is similar to creating and selling digital products, but instead of creating a digital product, you refer people to other businesses or services.

For instance, if you own a real estate company and want to increase your business by referring leads, you can use a site like LeadGenius, which connects you with companies that will pay you for each referral or you can create your own inner real estate CRM where you will manage all your referral leads on your own.

When you use LeadGenius, the company will provide you with a script that lists your leads’ contact information and enables you to refer to them. They will pay for each lead on a per-click basis, and you can earn as much as $8 for each referral.

5. Promote Affiliate Products

Affiliate marketing is a business model that promotes products and services for other companies and receives a percentage of the sales in return. You can use affiliate marketing to put extra money in your pocket by selling items that fall into one of your interests or passions.

For example,  if you’re an outdoors enthusiast, sell products on your website to appeal to people who share the same interests. A share of the revenue created from each sale is automatically deposited into your bank account. All you have to do is give time to build traffic and convert visitors into customers.

6. Invest In The Stock Market

Investment in the stock market is the best way to generate passive income. However, this process does require a significant commitment of time and money. You have to apply for an account with a broker, obtain market research information to help you make buying and selling decisions, and monitor your account regularly. You can also integrate cash flow management software into your business to reap exponential benefits.

The good news is that once you’ve successfully invested in the stock market, it becomes an asset that can provide you with long-term passive income without much work on your end.