5 Simple Fixes To Increase Your Business Cash Flow
When you find that your business cash flow is crashing, what can you do to correct course before it becomes a problem? Recently I shared how to spot cash flow problems in your business, and here I’ll share the solutions to each one. Because there ARE steps you can take, no matter how dire your Cash Flow situation might look. (And why talk about problems if you don’t offer any solutions, right?)
Ready? Let’s jump into my top 5 ways to increase your business cash flow!
Cash flow solution #1: Review your ROI for each income source.
If you’re not bringing in the income you need, it’s time to identify what is and isn’t working with each of your revenue streams. So where can you start? Let’s look at what you might do if you have a service-based business.
If you have a service-based business, start by considering what it takes to deliver your service. This includes the time it takes you and/or your staff to serve clients.
For example, I know that my business ebbs and flows as far as time I invest for my clients. So I do a “drill-down” ever quarter to evaluate my time expenditures. How much time am I investing with each client, what do they need, and am I using the time as productively as possible for each client?
This helps me decide if I need to deliver my services more efficiently, or adjust my prices to reflect the time and attention clients get. It’s a way to make the most out of the time-money continuum.
Cash flow solution #2: Project your Cash Flow based on potential scenarios
Want to project what your future Cash Flow might be based on what you know right now? It’s time to do a little speculating with a few likely outcomes, so you can simulate a few real-time results and plan accordingly.
Here’s one way to do that. Let’s say you have a service-based business. Consider these 3 possible scenarios with your clients:
Scenario 1: Your clients pay on time
Scenario 2: Your clients pay late
Scenario 3: A 10% non-collection
Now, project your Cash Flow in each of these scenarios. What would happen to your monthly income in each of these 3 cases? Once you’ve made the best projection you can with each potential outcome, use this info to help you map our your Cash Flow. Then, do what you can ensure you have enough of a cash buffer to match your expenses.
Cash Flow Solution #3: Reevaluate your personal budget
If you are taking more owners draws than your net income, it’s time to look at your personal budget. If your business profits can’t support your budget right now, it’s time to revisit your business model and find a way to catch up with those needs. This could mean adjusting your prices, adding new income streams, or adjusting how you deliver your services (like we talked about in #1).
Cash Flow Solution #4: Re-stabilize your Cash Flow
If you find yourself taking on loans or stacking up credit card debt to cover your expenses, it’s time to drastically change your spending. (At least until you can pay off this revolving debt!) This could mean things like taking on internal work yourself instead of paying a contractor. Or running a promotion to increase sales, with the purpose of paying off the debt with that extra money. Another possibility could be taking fewer draws and living off savings for a limited time.
Cash Flow Solution #5: Set aside money for taxes
It might sound counterintuitive, but setting aside money in a designated tax savings account really can help your Cash Flow. How can this make a difference? Here are 3 key ways:
1-You’ll be saving for taxes so you don’t have to scramble to pay them when the time comes.
2-Your savings will earn interest while it waits.
3-If you’ve saved more than you need for taxes, you’ll get a built-in “bonus” at the end of the year. So it’s a win-win!
So if you don’t have a tax savings account yet, now is the time to set one up. Plan on saving 10-30% of your net profit each month, and have a designated account.
There you have it! 5 simple strategies to increase business Cash Flow and get your business finances back on track. Which one of them stands out the most to you?
Let me know in the comments below which of these items you’ll use first in your business!
Until next time,
Love, Light, and MONEY, Honey…
Kaylee