How To Improve Cash Flow As A Growing Business

Cash flow is an integral part of a business and it’s success. As a growing business, it’s critical to maintain cash flow in a positive way, rather than to let it spiral out of control.

There are plenty of ways in which to improve cash flow so that you can continue to find success as a company in 2024 and beyond. If cash flow seems to be a problem for your growing business, then here are some helpful tips worth knowing.

Do cash flow forecasting

Cash flow forecasting is a great way to understand whether or not you’re spending and collecting your money in the best manner. For some businesses, the cash flow might not look too great now but with forecasting, it looks a lot better within the next quarter.

Cash flow forecasting might not be something you’re familiar with, especially if you’re a small business that doesn’t have financial support in-house. It’s worth doing the research and understanding how cash flow forecasting works.

With this type of forecasting, you can predict what your cash flow is going to look like over the next few months to years. This is based on existing income and expenditures. This type of forecasting can be helpful to cut costs and to make smart business decisions in order to improve your efforts as a company.

Reduce operating costs 

Operating costs can often be the most expensive of outgoings, which is why it’s important to take a closer look at your costs and how you might be able to reduce them. A good way of doing so is by implementing an operating cash flow formula. This is a useful metric to measure your operating cash flow so that you’re not spending more than what’s needed.

With a higher rate of operating cash flow, you’re improving the financial stability of the company as a whole. It therefore pays to introduce this element to your financial planning and budgeting. 

Not only does it help with the internal expenditures but it also helps when needing to present to stakeholders and other investors into the business.

Send invoices earlier

One of the main problems that many businesses face when it comes to poor cash flow is the rate at which invoices are paid on time.

It’s important to be mindful of how persistent you are when it comes to asking clients/customers for invoices that are due. You should put in the proper procedures to ensure that the invoices you create for your customers are created as soon as possible and sent within the requested time period in which they are to be paid.

Typically, most invoices should be paid within thirty days but some clients might try to stretch this payment for another week or two. While that might be fine on occasion, it’s not something you’ll want every client doing, every month. Otherwise, it could lead to problems in your cash flow as a result.

You might want to introduce software that is helpful in keeping on top of the creation of invoices, sending them out, and reminding clients to pay when it’s time.

Cut unnecessary spending

Expenditures are very much part and parcel of running a business, however, no expenditures should be enough that it’s running the company into money troubles.

This is where expenditure cuts might be required, whether it’s drastic cuts or minimal. Unnecessary spending is something to look at when it comes to each and every department within your business.

Consider what areas could do with saving in and whether some might be spending more than necessary. Assess these expenditures on a monthly basis and review them every quarterly. Staying on top of the spending is important, especially when there might be certain staff members who are going over their budgets religiously.

Negotiate with suppliers

Suppliers are something to stay in touch with, even if you’ve got longstanding connections with them.

Sometimes though, you might find that some of your suppliers might need to negotiate with on renewals. With the cost of living, prices tend to go up but aren’t always justified when it comes to your satisfaction with services.

If you find that costs are going up, then you might want to speak to the suppliers individually so that you can arrange any negotiations if necessary. It might be time to let some suppliers go depending on what services you might find elsewhere in comparison.

You should also do what you can to keep your suppliers happy and reward them for offering great service over the years. This might help you win a few discounts over the years in return!

Diversify revenue streams

In order to really help rocket your business when it comes to cash flow, it’s worth diversifying your revenue streams. There are plenty of ways in which to do this as a business and it might be helpful if your company is struggling.

You might want to supply additional services such as presenting at conferences or helping other businesses with their own efforts.

There’s also the option of providing digital products or courses that you could offer to customers if it’s applicable. Diversifying your revenue streams is a great way to keep on top of providing excellence for customers and also to help expand your business. Widening your business prospects might pose risk in some cases, but it can also improve cash flow too.

Consider outsourcing

Finally, if you’re struggling with your cash flow, then you might want to look at what options are available externally. Outsourcing is a great way to improve cash flow and something to consider when you want to limit the amount of expense that costs your company internally.

With outsourcing, you’re only spending for the services and work that’s done, so there’s nothing tying you into spending more money and risking more of your cash as a business.

Hopefully, with these tips, you’ll be able to improve your own cash flow as a growing business this year and the next.