Cash flow problems can make the day-to-day operations of your business much more difficult. When you lack the money to pay suppliers, contractors, or fund your other operating costs, you miss out on critical opportunities. However, if you can make it through a cash flow crisis, the rewards can be great, including higher growth, and a leaner, more stable business. Here are some ways to get out of your cash flow crisis with a business that’s stronger than ever.
1. Increase Prices
When you don’t have enough cash on hand due to huge demand from customers or the failure of some clients to pay promptly, increasing prices can quickly get you back in the black. This strategy is more immediately effective when you have shorter payment terms (one to 30 days). If your clients pay immediately, you could be bouncing back within the month.
However, you should increase prices carefully as there could be a negative impact of doing so, including slowing growth or losing more reliable customers that pay on time. If you’re concerned, you can selectively raise your prices for clients who don’t pay. Or, selectively raise your prices on select services. Ultimately, there’s a lot of thought that goes into pricing. Consider brushing up on pricing optimization before adjusting your prices.
2. Cut Costs
Cutting costs is a straightforward way to make the most of the money you do have in the bank. Take stock of all of your costs and find out if they are truly necessary for your business as it stands now. Many older businesses become encumbered with superfluous expentidures, such as software they don’t really use, staff positions they don’t really need to fill, or advertisement methods that aren’t providing a strong return on investment. Though this process can be challenging, it is very healthy for a business over the long term.
3. Revise Your Billing Practices
Increasing prices and cutting costs are rather large-scale changes to your business. You can pull yourself out of a cash flow crisis without by changing your billing practices. This is a slower method, but it can help.
Consider the following changes to your invoices:
- Send complete and correct invoices right after the job is complete
- Change billing terms to immediate payment, or not more than 30 days
- Increase the interest you charge on late payments
- Follow-up weekly on missed or late payments
- Hire a collections agency or a lawyer to reach out to late clients
- Request up-front payment from clients who have paid late before.
4. Choose Invoice Factoring
Luckily, there is a way to quickly get yourself out of a cash flow crisis that doesn’t require large structural changes to your business. It also doesn’t require you to invest your time or money in new billing practices or methods of following up on bad debt. Invoice factoring is a simple solution that makes your business more stable.
You send your invoice to a factoring company like J D Factors, and we pay you immediately. We take on the work of forwarding the invoice to your client and following up on late or missed payments. Meanwhile, you already have the cash in your pocket, and you don’t need to dedicate resources to debt collection.
J D Factors also offers non-recourse factoring, which means that if your client goes bankrupt and can’t pay, we’ll protect your cash flow by taking the loss. Reach out to us today to learn more about our non-recourse invoice factoring services.
