4 Ways to Beat the Small Business Cash Flow Crunch in 2018

This article reviews four simple and effective ways you can increase cash flow for your small business in 2018. More specifically, these methods help turn accounts receivables into cold hard cash that your small business can use today.

Some of these cash flow strategies may take a little time to set up, but you’ll find that the resulting cash will be worth the effort. By implementing these strategies, you’ll be joining thousands of other small business owners that are looking for resourceful ways to get paid sooner.

1. Make it Easy for Your Clients to Pay

It’s only logical that clients will pay promptly if it’s made easy for them. Here’s how: First, when you establish a relationship with a client, state your payment terms and options up front. Let your clients know whether you accept cash, checks, credit cards, cash loans, or online payments.

Second, start accepting credit cards. As your clients begin experiencing their own cash flow crunches, they will want to manage their cash flow by using credit cards to pay for services. By accepting credit cards, you will increase your chances of being paid in a timely fashion. These days, small businesses ranging from plumbers to accountants are accepting credit cards and seeing an upsurge of cash flow as a result. Although you will have to pay 1% to 3% to a credit card processor, the increase in your small business cash flow makes the fees worth paying. Remember that 90% of business failures are due to cash flow.

Third, consider accepting online payments through services such as PayPal, Verisign, Quickbooks, or Authorize.net. Your clients are every bit as busy as you, and by allowing them to pay online, your permitting clients to handle payment at a convenient time, which may not be during regular business hours.

2. Don’t Be Afraid to Ask for Your Money

Friendly reminders, along the lines of, “Did you get my bill and when can I expect payment?” can significantly increase payment rates. Before you start asking for payment, make sure the payment terms are stated clearly at the beginning of the client relationship. Next, use software to track the age of various accounts receivables so that you can easily list late-paying clients, and start calling with friendly reminders. Finally, if necessary, consider using an outside collection agency for extremely delinquent accounts. Use this option with caution, as you may negatively impact your business relationship with your late-paying clients, or others who know those clients.

3. Balance Your Client Base for Steady Cash Flow

Depending on how you typically bill for products or services, create a steadier flow of cash into your business by using different payment structures for different clients. For instance, if your business is seasonal or it commonly experiences fluctuations in cash flow, consider switching some clients over to a retainer-basis so that the monthly cash flow is steadier. With a retainer, you offer your client a certain amount of products or services for a fixed fee per month. To encourage clients to switch over to this method, consider throwing bonus products or services into the mix or offering a slight discount. While this might cut into your profit margin a bit, you will get the benefit of more regular cash per month.

It can take a considerable amount of time to implement these strategies. For instance, if you decide to accept credit card payments, you will need to set your business up with a merchant services company. Similarly, if you choose to move some of your clients on a retainer basis, you’ll need to spend quality time with those clients to persuade them that a retainer is a win-win solution. However, you’ll find that if you invest the time and effort up front, your bank balance will reflect a much healthier cash flow, which is crucial in today’s tough economic times.

4. Plan for Fast Cash

There are two ways to get your clients to pay up sooner. First, you can negotiate short payment terms when you contract with a client. These days, many small businesses are asking for and getting “net 15” payments. See which one of your clients might be open to these terms. Second, if you’re not comfortable asking for a “net 15″ payment, you can offer clients a discount for early payment. Offer 1 to 2 percent discounts for paying within 10 days. While you’ll be losing cash to the discount, your overall cash balance will still be profitable.