5 Effective Ways to Boost Your Small Business’ Cash Flow

September 29, 2015 / Reading: 3 minutes

It is often a labor of love to continually make financial gains with your small business. Positive cash flow often comes and goes during the initial growth phase of a business. Trial and error is a significant part of the cash flow equation as you attempt to project your cash flow, while planning ahead and addressing unforeseen circumstances.

To help tackle occasional cash flow issues, we have listed several ideas that might help you stave off temporary financial uncertainty:

1. Raise Your Prices with Sufficient Notice

If you have been in business for a while, it’s likely an opportune time to raise your prices. However, do not raise your prices without notifying your existing and past customers. Do not stress about providing a long explanation. Simply explain the rate change and provide a brief explanation as to why the rates are increasing.

Providing proper notice to clients also gives them an incentive to stock up on your products or renew their contracts before the rate increase. An influx of customers wanting to commit before rate increases can be a viable way to increase your cash flow issues in the short term.

2. Run Special Promotions or Sales

Consider running a special on a certain product or promotional discount for new clients who sign contracts of certain lengths with your small business. Sales and special promotions can work equally as well for small businesses as they do for larger corporations or chain stores. Sales, sign-up discounts, and promotional bonuses help incentivize clients to buy or hire you immediately. This will help drive up cash flow in the short-term and hopefully create a long-term relationship with clients.

Related: Free Cash Flow Statement Template

However, you need to ensure you run sales or promotions occasionally. Frequent sales or promotions for the same products or continually promoting over several months often has an inverse effect and causes customers to believe the sales are merely price decreases. As a result, it is important to post specific deadlines for your sales or promotions through all advertising mediums.

3. Consider Selling or Leasing Unused Assets

It might be time to take an inventory of all materials, equipment, and inventory in your offices to determine if you have any excess or extraneous items. If you conclude that you have an excess, consider selling these items to increase your short-term cash flow.

Additionally, if your business has extra office space, it might be time to consider leasing or subletting your additional space to potentially increase your short-term and long-term cash flow.

4. Place Mandatory Deposits on Custom or Larger Orders

If your small business does a significant amount of custom or larger orders, it is a good practice to require mandatory security deposits for at least 50% of the quoted price.

Custom orders are especially an important consideration for security deposits as unique items or services have limited resell value to other customers. Thus, without a security deposit, your small business takes an unnecessary risk of taking a lower payment at the time of delivery. It also reduces additional expense for collections actions that are necessary to recover funds that could have been acquired as security deposits.

5. Plan Payments on Long-Term Contracts to Your Small Business’ Benefit

If your small business routinely deals with clients who refuse to enter into contracts requiring security deposits, you can alternatively attempt to negotiate more aggressive payment benchmarks and terms that exceed your typical costs. This allows you to structure an agreement that takes into account your potential for loss, while acquiring or keeping clients whose policies do not allow them to enter into contracts with security deposits.