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Cash flow problems are at the core of many a small business sufferings. Sometimes, the issue is how money coming into the business gets used; at other times, the challenge is getting the money flowing in in the first place.

Because businesses depend on cash to survive, any trouble with accessing it on a regular basis requires an urgent fix. In certain cases, this might mean effecting a total change in a venture’s focus- including products, market and mode of operation. If the problem is an absence of real, sustained demand for the business’s products, shutting things down might be the only reasonable action to take.

But let’s say a business- yours perhaps -is struggling to get cash flowing regularly but does clearly have a sizable market and other conditions for growth in place. How do you unblock the clog that keeps funds out? And how do you apply the money you do get, and ensure that there aren’t any leakages letting them out?

Here are ten proven ways to deal with your cash flow issues:

  1. Borrow…if it’ll boost growth

A painful cash squeeze could drive you to take out loans. Be careful to go with this impulse only if you have a plan to use the loan for growth oriented purposes. You may have pressing concerns to deal with; but you don’t want to incur debt on something that isn’t going to help you raise your revenues in the long term.

In a nutshell: don’t take a loan unless you know there’s a fair enough chance that it will help deal with the problem you want it to. And be certain that won’t burn a hole in your account that you’ll struggle to fill.

  1. Hire equipment if it’s cheaper than buying

It typically costs less to hire equipment for a while, than it does to buy it outright. But there’s more to comparing the cost of these options than this.

When you’re considering getting a lease for equipment, you should look at the cumulative cost you might incur by using that equipment over time. You might be required to pay for the lease on a periodic basis; it could cost you more to hire a van for six months than it would for three months.

Find out what you might be paying for leasing stuff for the period you intend to use it, and see if it’s better than purchasing it, given your limited finances. Go for leasing if it’s the more affordable choice.

  1. Buy things in bulk

Bulk purchases are usually less pricey than smaller units, so it makes sense to buy your input this way.

A smart way of reducing the amount of cash you spend in purchasing material is to team up with other people or businesses also looking to buy in bulk (as, say, in a cooperative). Because products cost less to buy in larger quantities, the bulk your group buys could be less expensive than they would be if they were obtained in the individual sizes into which you split them after the group purchase.

  1. Monitor your stocks

Inventory issues could adversely affect your cash flow. When your product stock runs too low, you might struggle to meet demand; if this situation drags on for too long, you might even lose clients, and the cash they come with. On the other hand, inventory piling up to overflow could cost you money to store. It could also be a sign that it isn’t selling quickly enough. Both these situations portend a cash shortage.

Make sure to stock up when you observe a drop in inventory levels. And if a buildup of inventory is the result of low demand, you might have to clear the goods by selling at a lower price, and replace them with products that are in higher demand.

  1. Make your product offerings more diverse

Don’t put all your eggs in one basket. You never know if (or when) an unpredicted storm will take them all away.

Vary your offerings, so your revenues will come in from different products. When one or a few of them aren’t moving well, the others could guarantee that you still have something flowing in, to keep your business going.

  1. Make clients pay upfront

You may demand this especially for larger orders. This is because bigger quantities are acquired for larger amounts of money; you’ll want to begin making up for the purchase or production cost you’ve incurred on them as swiftly as possible, and reduce the risk of a long drawn out repayment process (or worse, a default).

  1. Give discounts for early payment

The thinking behind this strategy is that customers are more likely to pay up on time for the things they purchase if they’re incentivized to do so. And when they do pay earlier, cash flows in more regularly. This outcome in turn makes it easier for you to handle inventory planning and other forward looking operations.

The hard work here comes in determining discounts that are attractive enough to encourage prompt payment, which doesn’t make your accounts suffer.

  1. Increase prices

This looks like a dangerous move most of the time. Would it not scare customers away?

Actually, you can do this successfully, without losing paying clients. For example, you can introduce product grades (i.e. varying sizes and quality), in place of a single type. Then you can raise the total price of the old single unit, and spread it across the new differentiated offerings in a graduated way.

Find out more smart ways to raise prices in our article, How To Raise Prices Without Losing Customers.

  1. Adopt electronic payment

One reason customers don’t pay promptly enough (or don’t buy at all) is that they don’t have “enough cash on them.” Thankfully, today’s technology removes this excuse and lets them buy and pay for your products without hard currency. You can take advantage of mobile payment solutions and similar technologies to increase your receipts.

There’s an ever growing number of fintech platforms offering digital payment services. Compare the costs they charge, and use one which gives you the best service for a reasonable charge rate.

  1. Save for the rainy day

Hopefully, things won’t always be tight. If your business does well enough, there will be times when it does gross a fair bit more than you expect. Customers will buy by the dozen, and money will keep rolling in.

What you do (or don’t do) in such times may determine how you pull through the lean periods. And there will be lean periods.

Don’t give in to the temptation to splash the cash when there’s plenty of it around. Put some of it back into strengthening your business, and save the rest in an account that yields high interest on deposits. You may need it when the heavens get overcast.

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This article was first published on 13th August 2018


Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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