82% of small businesses fail due to cash flow problems. Therefore, it is highly important that your business’ financing, operations and investing activities are efficient.
So, what are some ways to optimize your business’ cash flow? Read on to find out more!
1. Lease assets instead of buying
Leasing equipment or any assets usually ends up more expensive than purchasing in the long run. In this case, leasing may seem counterintuitive given the need to protect your business’ bottom line. However, it is important to note that leasing enables your business to prioritize other capital needs and aids to maintain strong cash holdings for its operations.
2. Have better inventory management
Stocking too much inventory ties up cash that could be better deployed in other areas of your business. On the flip side, stocking too little inventory will lead to lost sales. Hence, it is important that you do inventory planning by forecasting your sales based on your business’ historical sales figures and cyclical trends. Additionally, it is necessary to have a system in place to keep track of the ins and outs of your goods. Next up, do up a list of your slow-moving goods to avoid placing order for more.
3. Conduct customer checks
It is essential that you conduct credit checks on your customers before onboarding. Credit score checks are generally low-cost, and this can be easily obtained via Lyte Finance! With these checks, you will be able to accurately forecast if a customer will pay on time or late. This helps your business to make good decision with regards to customer onboarding. If you choose to proceed despite unfavourable checks, we recommend that higher gross margins and interest rate should be put in place to compensate the risks taken.
4. Negotiate better supplier terms
Good supplier credit terms are essential in easing your business’ cash flow. Examples of such credit terms include longer credit days and early payment discount. To enjoy such credit terms, this typically requires a long working history or friendly ties with your suppliers. So… what are you waiting for? Start building close relationship with your suppliers right now!
5. Employ the use of invoice financing facility
Invoice financing is a short-term financing tool that allows businesses to advance money against their unpaid invoices. It allows you to get funds almost immediately and improve your working capital cycle. Do refer to Lyte Finance’s article on invoice financing for more details on how it can help your business.
To know more about invoice financing and credit checks, email us at [email protected]!