Businesses that are cash flow negative—i.e., those that pay more money out than they bring in—are at serious risk. Without positive cash flow, or real cash flowing into your business regularly, you’re at risk for cash flow problems. Keep in mind that cash and profits aren’t the same thing. So, if you’re doing a ton of business, but your customers are slow to pay on their invoices, you might still have cash flow problems.
The good news is that if your business is having trouble with cash flow, there are a number of things you can do to take control.
If you’re having trouble managing your cash flow, or if you’d just like to try and figure out how to improve it, consider these tips for better cash flow.
1. Know when to lease and know when to buy
Virtually all businesses need equipment, facilities, and property to operate; whether they should buy or lease those items is another question.
If your business is strapped for cash, you might want to consider leasing equipment and renting retail or office space rather than buying it outright. In addition to getting access to the materials and spaces your organization needs to be successful when you choose to lease those items, you won’t have to tie up significant chunks of your capital. In other words, your business will be better positioned to respond to new opportunities and address unforeseen challenges.
Once you’ve solved your cash flow problems, it might be time to look into whether more long-term arrangements, like buying office space, makes sense. Owning your property means your business will essentially be paying rent directly to you (or more specifically, your LLC)—and there are also tax benefits to take into account, too.
2. Make it a habit to shop around for better prices
How confident are you that you’re getting the best deals on your supplies, systems, and utilities?
While it’s probably counterproductive to shop around for new suppliers every other day, it might be worth reassessing your operations on a regular basis—whether that’s monthly, quarterly or even yearly will depend on the scope of your business.
In today’s competitive and connected marketplace, there certainly isn’t a shortage of businesses vying for your company’s dollars. But remember: it’s important not to pick new suppliers based on price alone. After all, if shipments don’t arrive on time or cloud computing assets aren’t always available, your business could very well take a hit.
So when shopping around for new suppliers, certainly look at the price—that’s how you’ll solve your cash flow problems. But be sure to consider a potential new vendor’s track record, too, before making a decision.