(Getty Images)
Running a small business can often mean tight margins and watching each dollar that comes in. Sometimes, it's hard to manage cash flow if you're trying to buy in bulk to reduce the costs of each item or if you need to invest in equipment or upgrades.
We've collected five great, easy-to-implement ways for small businesses to improve cash flow.
Reevaluate your pricing structure
If you've been in business for a while, you may not have completed a price comparison recently. You may be able to charge more for your goods or services now than when you were first starting because you've built up a solid performance history.
For example, if you offer accounting, legal, or another type of professional service, you may be able to charge a new client a bit more per hour than you're charging current clients. If you sell tangible goods, you may sustain a 10% bump in prices without driving away customers.
Analyze your current pricing strategy to ensure it aligns with market demand and covers rising costs. Consider adjusting prices to reflect value without deterring loyal customers. For seasonal or premium products, dynamic pricing may help boost revenue. Also, offer tiered pricing or bundle options to encourage higher sales per customer.
Completing a comparison shop-around ensures you're placing yourself correctly in your market. Not every consumer shops solely based on price, and if you've established yourself as an authentic, trustworthy brand, then you can keep your customers, even if they're paying more.
Streamline payment
Offering online payment services for clients can make it easier for them to pay you immediately. Ensure you're invoicing promptly, and consider emailing invoices versus waiting for mail delivery. If you offer a link to an online payment portal in the email, your clients can pay immediately. You may also wish to offer an incentive for paying early or assess penalties for late payments.
If you don't invoice clients and they instead pay for their purchases immediately, consider offering online sales in addition to your brick-and-mortar store sales. If you haven't already, you can also expand your payment options, such as offering Apple Pay and Google Wallet services. Don't miss a sale because you can't take your customer's money.
Update your equipment
Investing in equipment, from point-of-sale machines to specialty production equipment like a baker's oven or sewing machine, can be one of the largest start-up costs for a small business. You may find that older, less efficient machines are slowing down your ability to create goods for sale or that older software isn't as efficient in keeping up with client needs, online sales, or daily business operations. Modern technology often uses less energy, requires fewer repairs, and allows for greater output in less time. While initial costs might be high, the long-term savings and revenue potential can make the investment worthwhile.
If you haven’t already, consider leasing your equipment instead of buying new or secondhand. Most lease agreements come with a maintenance package, which can save you money on repairs and preventive maintenance.
Plus, when you lease equipment, you can typically upgrade every few years, ensuring your business has the leading-edge technology and machinery to run efficiently and improve your products and service. Everything from cash registers to phone systems can be leased, possibly saving you a bundle in the long run.
Renegotiate your supplier contracts
You may be in a better position now that you're established to negotiate better pricing from your suppliers. Review current contracts with suppliers and negotiate for better terms. Explore options like bulk purchasing for discounts, or extended payment terms to free up short-term cash. Building good relationships with suppliers may also open doors to flexible agreements during slower periods, easing cash flow pressures.
If you have a steady history of on-time payments and have been consistent with orders, asking for a better deal can help reduce your overhead and improve cash flow. Or maybe a new supplier in town can offer you a more attractive package.
Make sure if and when you do change suppliers that you're getting a dependable replacement. You may wish to start small, ordering 15% of your items from the new vendor until they've demonstrated quality and consistency.
Focus your marketing
Improving your cash flow isn't just about cutting expenses. You can also bring more customers in or increase sales to your current customers with a better marketing strategy. For example, your website should work for you as a sales tool, not just to provide information. You may choose to have an online store or offer other resources for your customers.
Rather than a broad approach, concentrate on high-ROI marketing channels that reach your target audience effectively. Evaluate which campaigns or platforms bring in the most business and allocate resources there. Consider low-cost tactics like social media, email marketing, or referral incentives to engage customers without straining your budget.
Many people respond to brands and businesses that are authentic and engaging. For instance, a website that offers useful content creates greater trust with your customers. For example, if you have a bakery, you may wish to post short videos with at-home baking tips for your customers. Or a clothing boutique can provide sneak peeks of new arrivals and blog posts about the latest fashion trends.
Regularly looking at how much you're spending can help improve your cash flow. And if you aren't actively growing your business, you may be missing out on new customers. By incorporating tighter spending and growing your business through better marketing, you can easily begin to see results.
For more information
For more information to help your small business, check out the BBB business news feed and the BizHQ.
BBB Great West + Pacific contributed to this article.