7 Cash Flow Improvement Tips

Increasing cash flow to your business is hard and can sometimes leave business owners feeling lost, confused, and defeated. While there is no secret formula to correctly running a business, there are certain steps and ideas you can implement along the way that can help increase profits and sales for your company.

One simple method to get your money to work for you is by depositing it into interest-earning accounts. Interest-earning accounts let your money sit and gain interest while you tackle other problems. Oftentimes these accounts will have lower interest rates than a certificate of deposit (CD) or money market account. This is why it’s a good idea to place the majority of your money into these higher-earning accounts while keeping the bare minimum in your interest-bearing checking account.
Having customers deposit payments directly into these accounts is a great way to have your money start gaining interest the second it is acquired.

Offering discounts for early payments is a great way to keep your funds tidy and organized. Collecting your rightly earned cash the second it is yours is an obvious way to increase and maintain cash flow.

To go with discounts for early payments, penalizing late payments with interest penalties emphasizes the importance your company places on on-time payments while deterring customers from making late payments, which can turn into a major headache.

If you offer a good or service that is to be reused multiple times by the same customers, offering a subscription service is an excellent way to entice people with discounts over a long period of time while also securing future business.

When applicable, recognize “scope creep” and use change orders in order to secure money for your company should a product or service change in any way prior to the payment being completed. Any changes in a contract before it is complete can enable you to seek extra compensation should that be the nature of the case.

Requiring deposits on large orders also protects you as the seller. With a security deposit equal to 50% of the total price, you are safe from financial loss in a worst-case scenario should the product have a limited sales value. Make sure your customers and clients are knowledgeable about the deposit and contract before the agreement is signed to avoid future complications.

The last option to increase cash flow that is in the same realm as security deposits is implementing stage payments or long contracts with certain customers. Many customers will be unwilling to provide a deposit for the same reason that you are requiring one as a seller. Instead of losing the potential business of these customers, offering stage payments can entice them into purchasing a product. These types of deals can often be worked out for the benefit of the seller by setting benchmarks and payment terms that exceed the total price of the product or good being sold.


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