Own a Small Business? Improve Your Day-to-Day Cash Flow with These Valuable Strategies

Owning a small business can get expensive — often unexpectedly so. Even for individuals who are highly diligent with their funds, all it takes to ruin your plans is a late (or non) paying client, an emergency expense, or a drop in sales.

Many small business owners and entrepreneurs worry about daily cash flow issues on a regular basis. If you face the same concerns, know that this is a common problem that you share with others. Thankfully, there are a number of strategies to help you eliminate these problems for good.

Join a credit union.

If you currently manage your business finances through a corporate or commercial bank, it may be time to consider switching to a credit union. In addition to providing a more personalized experience — and having locally-based locations — joining a credit union offers unique financial benefits that often cannot be matched by larger companies.

When you enroll your business, you can take advantage of the lower interest rates on business credit cards and loans. Depending on your spending habits, this could translate to hundreds — or even thousands — of dollars in savings. You’ll also be likely to earn more with a savings account through a credit union. Additionally, if you do not yet have a business credit card, opening one with a credit union can be a great way to control your daily cash flow.

Don’t wait to submit invoices to customers and clients.

If you opt to submit invoices to clients and customers all at once to save time, you might be creating cash flow issues with this single habit. Rather than waiting until the end of the week or month to submit invoices in bulk, consider billing your customers and clients in advance — or upon delivery of your product/service. Since there will be people who will want to pay right away, you can essentially give yourself almost immediate access to earned funds. If you decide to follow this strategy, try implementing other time-saving measures to keep yourself working efficiently.

Consider changing your business entity.

Some small business owners may not know this but changing your business entity can greatly improve cash flow. If you are working as a business of one, or meet the required criteria, you can function as a sole proprietorship.

What is a sole proprietorship business? In the simplest terms, it is when a business is set up so that there is no differentiation between the person who owns a business and the business itself. Having a sole proprietorship is simple and set up is inexpensive. At tax time, you will report all of your business income and losses on your personal tax return. The tax rate for sole proprietorships is often the lowest, which helps free up additional cash for your business.

Contemplate if additional exposure could benefit sales.

It could be a good idea to take a temperature read on your company’s visibility and brand recognition within your specific marketplace. There are small but important enhancements that you can implement at minimal cost to make a difference, such as website enhancements, digital marketing ads, etc.

Decide if it is appropriate to raise your prices.

Although you may be cringing at the suggestion, it is important to evaluate whether your prices are too low. This is especially true if you recently started your business or offer services rather than goods. Often, to quickly attract sales and clients, business owners will price their offerings far lower than others in the marketplace. If you intentionally use this strategy, you’ll want to compare your prices with similar businesses and raise them accordingly. Doing this can significantly boost cash flow — and help set up your business for long-term success.

Strategically finance your purchases.

Have a major expense coming up? Or do you need to make a purchase that will make your cash flow a bit rough for a few weeks? Rather than paying in full, consider financing your purchase in installments. While debt is certainly not always wise, a strategically utilized loan can be useful in ensuring that you don’t run short on cash for other business expenses.

Using these strategies can help get your business into a healthier cash flow pattern. Rather than stressing in the moment, resolve to take up proven habits to correct your specific cash flow problems. And whether you have questions about your business’s short or long-term finances, the advisory team at Beacon Pointe is here to help. For more information on how our team can help your personal and business finances, please contact an advisor today.

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