Improving Cash Flow: 5 Tips That Can Help
Most people are not in business for just the joy of it. The bottom line is that business owners are looking for the bottom line to be an increase in revenue. Yet the truth is that there are times when business can get stagnant. When that happens, how do you generate a positive cash flow? Here are five tips that can jump start your profits.
Incentives
One incentive you can use to bolster sales can be to offer a small discount on items that are paid in full within a certain period of time. This works especially well if you have big ticket items. The quicker the payment, the more profitable your sales market.
Layaway
Good old fashioned layaway was the perfect buyer-seller relationship prior to the credit card. With layaway, people made small payments on merchandise. The merchandise would remain with the seller until the item was paid off. The modern-day advantage to layaway is that the capital is available to you as the merchant. Just make sure that you have the product ready at the end of the layaway agreement.
Requiring a Down Payment
If you are in a niche market, this is an added insurance policy for your business as well as a way to increase your cash flow. Large or custom orders can also be included in this category. The amount of the down payment should be significant enough to discourage default of payment. In contractual work, you may wish to space payments out in intervals based on completion.
Penalties
In the same manner that you offer incentives for early payment, another option is to offer penalties for late payment. While it may not be possible to charge interest on certain products, custom products could incur an extra charge or a storage fee.
Investing
Outside of soliciting your clientele, the single most important way to generate a positive cash flow for your business is to invest your capital. One easy investment is to place your dividends into an interest bearing account. The more money you invest, the higher your rate of return. Another investment to make if you can afford the delay is to place money into an interest-bearing CD. CDs have terms from 6 months to year. The longer the investment, the higher the interest.
The purpose of having a business is to have an increase in revenue. When your business hits a financial ruts, these five tips may provide a bit of financial relief and start regenerating income.
