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Five tips to improve business cash flow






Running a business is hard work – juggling priorities while simultaneously reacting to shifting market conditions and demand. It’s likely the first priority is to make the business successful, which includes optimizing the company’s income/expense ratio. However, many small business owners still wonder how to improve small business cash flow.

To help adjust to the business’ liquidity needs, take a look at the following tips for improving cash flow.

  1. How to Improve small Business Cash Flow requires good record keeping.Improve your forecast: How to improve small business cash flow? One of the best strategies for improving cash flow is to develop a forecasting model and method that works for the business. In order to predict the amount of income it will have over the course of the year, it’s important to understand the ebbs and flows of the company’s purchase journey and the changes in the market that may impact customer choices. If the forecast consistently puts the company in a tight spot financially, dedicate some time to review process and numbers with a business banking partner.
  2. Consider your “float” timeline: Balancing supplier payments with receivables is tricky, and can make even the most seasoned business owner nervous. Many companies choose to pay suppliers with a check, which provides a 1-2 day “float” period before the money is debited from the business account. If that is all the time you need, that’s great, but some businesses prefer a longer buffer. To extend that timeline, you can pay suppliers with a credit card, which allows you 30 days to collect receivables before the cost hits your account. However, make sure you can adequately manage payments to minimize interest charges.
  3. Take a closer look at competitors: If it feels as though the company should be bringing in more sales income, how to improve small business cash flow may mean conducting a competitor review: Questions to ask can include: how do their product lines or services compare? Is pricing similar or way off target? If the company is selling for substantially less or more than competitors, it may be damaging chances to maximize income. Try to maintain fair market value for goods—pricing items too low can mean missed profit, but pricing items more than they are worth to the consumer likely means fewer sales.
  4. How to Improve small Business Cash Flow can mean replacing old equipment.Clean house: If cash flow is top of mind, take a look around. Is there old, outdated or obsolete equipment that can be sold, refinanced or salvaged? Spend some time reviewing assets to determine how they can help the business work smarter and gain back some liquidity. If the business is inventory-based, assess supply regularly. Are there enough of the essential items? Is there too much inventory of something that sells inconsistently or seasonally? Holding on to supplies can constrain cash supply, so order carefully and clean out frequently.
  5. Review bank relationship: If this hasn’t been done lately, it may be time to evaluate all of the tools and tricks the bank can provide to help improve cash flow. For instance, if receivables are slow enough to cause concern, review payment solutions to make sure customers are able to quickly and easily pay. And, check for interest-earning accounts for business accounts that carry larger balances so the company can earn more over time. In addition to these options, there may be other cash management tools the bank offers that can help optimize monthly income and expenses.

How to improve small business cash flow and maintain positive cash flow can be beneficial to operations, adapt to changing business needs and ensure the company continues to run smoothly. Use these tips to improve business cash flow and keep the company nimble for the next big thing that comes through the pipeline.

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When you click links marked with the “‡” symbol, you will leave UMB’s Web site and go to Web sites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other Web sites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.