Cash flow is one of the crucial factors that are essential for smooth survival of the business in the dynamic business environment. The term cash flow describes the money coming in the business minus the money going out for meeting the bills and other financial obligations. Therefore, it is essential for every enterprise to keep a regular check on the cash flow to maintain its sound financial performance. There are scenarios where a business might have huge profits on paper but still, run out of money.

So, let’s have a look at certain proven strategies to improve cash flow

1. Measure the business’ cash flow

“What gets measured gets improved”, according to some modern business management techniques, it is necessary to analyze how much exactly your cash flow is before developing policies to manage and protect it. A cash flow statement is a basis of anticipated as well as actual incoming and outgoing cash over a particular period. You can use this statement while setting budgets, business planning as well as for future cash flow projections.

2. Enhance receivables

The general rule of business says that the buyer pays for the goods or services he has purchased or consumed, thereby, injecting the cash in the organization through which obligations could easily be met. However, there are scenarios where consumers avail the credit facility and promise the seller to pay after a certain period. Now, if you are majorly selling goods or services on credit, your receivables will be increased and you will suffer from the situation where you will be out of cash. On the other hand, if your customers are paying in cash, receivables will be decreased, which gives you more cash to deal with the business liabilities.

Following are some techniques to decrease receivables and increase cash flow:

• Offer a cash discount to the customers
• Audit creditors regularly to keep a track on the high-risk credit holders
• Conducting follow-ups and issuing invoices promptly
• Identify and avoid slow-paying clients.

3. Manage business payables

Payables are a kind of liability for the business. The money owed by the business towards creditors, lenders, employees and the government (in the form of taxes) is known as payables. Paying the liabilities before their due date can decrease the amount of cash from your business. In order to maintain a decent amount of cash in the organization, you should manage your liabilities as well as the debts in an appropriate manner. If you are running out of cash, ask for an extension from your creditors, or seek the assistance from a reputed private money lender for availing small business loans. Whenever your creditors provide you discounts for settling the account in full or for paying the lump-sum amount in cash, grab the opportunity to minimize your financial burden.

4. Surviving shortfalls

Every business enterprise, once in a while faces certain shortfalls wherein neither can they fulfill their commitments with the creditors nor do they stand in the position to meet any other obligations. But this does not mean that you should shut down your business and declare yourself as an involvement because a downturn is a part of the business functionalities and it is not going to stay forever. Therefore, you should adopt adequate cash management practices to tackle this situation such as critically evaluating large purchases, paying back the amount to creditors in installments, etc. Also, scientific management of inventory helps to identify idle/slow-moving stocks which can be offered at discounts. However, the primary tactic to deal with the shortfall is ascertaining the upcoming challenges through market research and by adopting an effective approach to deal with them.

5. Improve your Marketing Tactics

Even a minor improvement help your business to move towards better cash flow management and if the marketing – that is considered as one of the most vital elements of business – gets improved, it definitely brings positive results for the business in terms of enhancing cash flow by attracting a number of new customers.

The primary reason is that by improving the marketing techniques, you will be able to reduce cost per lead that results in uplifting the lifetime value of your customers along with giving you exposure to enter into new markets.

Therefore, the cash flow statement should be reviewed regularly along with keeping a regular check on it. Continuous monitoring of cash flows and market research will help you to discover new strategies for moving on to the next level and to make further processes for managing the business efficiently.