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How to Improve Cash Flow Management: 8 Strategies you can Implement Right Away


Imagine that you're running a small business, and everything seems to be going well. You've got a steady stream of customers, your products are selling well, and you're starting to turn a profit. But you realise that you're struggling to pay your bills.

You're constantly dipping into your savings to make ends meet, and you're worried about how you will make it through the next month. This is the story of many small business owners, and it's a story that's all too familiar regarding cash flow management.

But that doesn't have to be this way for your business. With the right strategies, you can take control of your cash flow and start growing your business instead of just getting by.

In this article, we'll show you how to improve your cash flow management in 8 easy strategies you can implement immediately.

But, we won't be doing enough justice to the article if I didn't walk you through what cash flow management is all about in context. So, let’s start there…

Team meeting looking at graphs about cashflow management

What is cash flow management?

Cash flow management is managing and planning the flow of money in and out of a business or an individual's finances.

It involves tracking and forecasting the inflow and outflow of cash and making decisions on how to allocate cash resources to support business operations best and achieve financial goals.

This aims to ensure enough cash is available to meet short term and long term financial obligations and avoid financial stress or failure.

Now, let's dive into the 8 easy strategies you can implement to improve your cash flow, shall we?

1. Encourage customers to pay early

Encouraging customers to pay their invoices early is a great way to improve cash flow.

Offering discounts for early payment, setting up a system of early payment incentives, or implementing a "buy now, pay later" system can help to have more money coming in sooner, easing cash flow concerns.

This can also help to avoid late payments that can cause financial stress and negatively impact the credit score. Encouraging customers to pay early can also help maintain a positive relationship with them.

Hand holding out a payment card - signifying a customer paying early or on time, to help with cash flow management

2. Manage your stock and suppliers

Properly managing your stock and suppliers is another way to improve cash flow.

When you order what’s necessary when it’s needed, you avoid overstocking or relying on unreliable suppliers. Plus it can help to reduce the money tied up in inventory. This can increase your cash flow by reducing the amount of money spent on unnecessary stock.

Effectively managing your stock and supplier can also reduce the risk of stockouts, leading to lost sales and negatively impacting customer relationships.

3. Conduct customer credit checks

Credit checks on customers can help assess their ability to pay and manage credit risk.

Identifying your customers' creditworthiness can help identify those who may be more likely to default on payment, and steps can be taken to protect yourself.

This can include requiring a deposit or implementing a credit limit. By conducting credit checks, it can reduce the risk of bad debt and increase cash flow.

4. Consider your other assets and investments

Another way to improve cash flow is by considering other assets and investments. This can include selling underperforming assets or utilising investments to generate additional income.

Reviewing assets and investments can increase cash flow and help to improve overall financial health.

It's also important to monitor and understand the return on investment (ROI) on any new asset or investment, as it can help determine if it is worth it.

3 business men looking at charts on a board, considering ways to improve their cash flow management

5. Send invoices out immediately

Sending invoices out as soon as the work is done or the goods are delivered will ensure you get paid faster. This can help to increase cash flow and reduce the risk of late payments.

You can also set up automatic invoicing or reminders to ensure invoices are sent out promptly and on time.

Struggling with a broken payment process?

Don’t worry - we can fix that. We were joined by Pleo and Telleroo on School of Startups, to share how you can fix, build and maintain a great payment process. With:
  • Wes Rashid, Co-Founder & CEO at Accountancy Cloud
  • Liz Sheldon, Partner Lead at Pleo
  • Andrew Cookson, CEO at Telleroo
Watch now

6. Refine your marketing strategy

Refining your marketing strategy can help you to increase sales and bring in more revenue.

As a startup, when you understand your target market and identify what drives sales, you can focus your marketing efforts on the most effective channels and tactics.

This can include experimenting with different marketing channels, such as social media, email marketing, or content marketing.

Additionally, tracking your marketing efforts and analysing the results can help you to make informed decisions about where to allocate your marketing budget.

Marketing team brainstorming ideas to refine their strategy to help cash flow management

7. Use electronic payments

Electronic payments, such as credit cards, bank transfers, or echecks, can speed up the payment process and increase cash flow. Electronic payments are faster and more secure and can help to reduce the risk of lost or stolen funds.

You can also come up with recurring payments for customers to make it even more convenient for them to make payments on time.

Personal holding card by laptop, ready to set up electronic payment for a recurring service. This will help the business with cash flow management

8. Use high interest savings accounts

A high interest savings account can help you earn more money on your cash reserves. This can help to increase cash flow by providing a higher return on your savings.

It can also be helpful in case of unexpected expenses or emergencies. Shopping around and comparing different savings accounts is essential to find the one with the highest interest rate and best terms.

Final recap

Cash flow management is the backbone of any business. It’s the lifeblood that keeps a business running. Cash flow can become a significant concern without proper management, leading to financial stress and even business failure.

By implementing the strategies we've highlighted, you can take control of your cash flow and ensure financial stability.

Startups like yours can raise the bar by leveraging technology such as cloud based accounting solutions. That's where Accountancy Cloud comes in. We're here to streamline your finance and accounting processes.

But we don't stop there. We're dedicated to help you on your startup journey. That's why we set up School of Startups. Listen and learn from some of the most ambitious startup founders.

If you’re ready to raise the bar higher, take advantage of the strategies and level up your business, we'd love to hear from you.

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