Simple Changes to Stabilize Cash Flow

Sharon Boyd has nearly 25 years of experience between both the healthcare and marketing industries. In addition to being an RDH and content writing expert, she also holds a degree in business. Her responsibilities primarily include tackling the communication barriers between small business owners or healthcare providers and their prospective clientele.

Simple Changes to Stabilize Cash Flow

Small businesses can have big struggles with money. Though on paper, your budget may be balanced with plenty left over, in reality, it’s about to topple you into insolvency and bankruptcy.

Don’t wait: take steps to stabilize your cash flow now so that next month and next year will become more secure.

How Are Your Dollars Coming In?

Take a look at how and when payments are being received:

  1. Graduated installments: Depending on what services you provide, consider restructuring when payments are due. Requiring 50% up front and 50% at completion seems to be a generous, complimentary gesture, but it could be detrimental to maintaining a positive cash flow. Changing your percentages due and the timeline, for instance 20% at the halfway point, 20% at the ¾ point, and the remaining 10% upon completion, could help your cash flow, without causing a problem for your customers.
  2. Change your billing: If you still rely on paper billing to contact your customers, it’s time to rethink. Sending a bill through the mail at the end of the month can cause a significant lag to your accounts receivable. With direct electronic billing software, banking, and auto-draft, there are plenty of options available that will be beneficial to you and your clientele. Imagine being able to get your payment within minutes of billing instead of weeks!
  3. Invoice More Frequently: It’s traditional to send an invoice at the end of the month, many businesses work this way. However, if you are spending time each day or week on a particular project or account, consider changing your billing cycle to every other week or twice monthly.

Seasonal Business Cycles and Cash Flow Fluctuations

A Christmas shop will probably not make much money between January and July. The same holds true for most seasonal businesses, whether they rely on a holiday, the weather, a sport, or something else entirely. If your company deals with seasonal slumps, do your best to be prepared for them. Identify when the most likely slump season is for you, then, little by little, build a cushion to help see you through cash-strapped months.

Create Another Income Stream

If you have a cash flow problem, you may have to get creative to solve it. Look at your company from many different angles. Is there anything else you can sell? A location that does well as a pumpkin patch in the fall might do well as a spring wedding spot. A photographer could offer group or private lessons for school aged kids or college students!

Finally, as mentioned above, build a cushion for yourself. Though this may make you a little less fluid in the short run, in the long term having a cushion protects your business from slow months, from big clients who don’t pay, or from unexpected emergency expenses! When you’re having problems balancing your budget and your cash flow, taking some creative and “outside the box” steps can help you maintain stability and position yourself for growth and the future!