Once you’ve finally managed to secure the financing for your small business idea, and started to turn a profit, you’ll obviously feel on top of the world. However, after you’ve gotten over this initial obstacle, you’ll be staring down the barrel of a totally new one: managing your cash flow effectively. This can be hard when you’re first starting out, but there are various strategies that can make it much easier…
Cut/Delay Your Expenses
One of the most popular ways for small businesses to make their cash flow easier to manage is cutting or delaying expenses. Applying this can take a wide range of forms, depending on the business niche. While there are certain recurring expenses you won’t be able to get around, for example extensive cover for tool insurance, there are still various areas you can examine, and look for feasible ways to grind down expenses. If you’re in manufacturing, for example, you may be able to use lower capital input to deliver the same standard of goods, whereas if you’re running a service business, there may be ways to improve efficiency and deliver the same results for your customers. However you cut your expenses, try to maintain the same quality standards you’ve been working to in the past. As a small business, having a loyal customer base is more important than high profit margins.
Negotiate More Favourable Payment Terms with Suppliers
Suppliers value you, the client, probably even more than you value a single, private customer. This gives them a very strong incentive to helping you finance your purchases, and keeping you in their corner. This is something you should certainly exploit when you’re looking to simplify your small business’s cash flow. Getting just another couple of weeks before you have to make a payment can mean the difference between a major deficit and swift, profitable expansion. If your current payment terms are set at ten days, ask for twenty. If they’re twenty, ask for forty. Obviously, it helps if you’ve been with the supplier for some time, with no disputes or late payments. However, even if your relationship with your suppliers is in its early stages, don’t be afraid to ask! Commercial suppliers are used to these kinds of negotiations, and will be much more flexible with their payment terms than you might think.
Sell and Lease Equipment That’s Just Sitting There
When small businesses go through a period of financial uncertainty, it’s time to consider selling anything non-essential. This is especially true for equipment that you don’t need. There’ a huge market for selling used business equipment, or leasing it, to other firms. Even if you need to use this equipment periodically, it can be a good idea to consider renting it, and using the proceeds from this to fund your business between then and the point where you’ll get it back. This is an especially smart consideration when it comes to equipment that has a long useful life, and is relatively easy to transport and install in other premises.
