Cash Flow Hacks for SMEs

When cash flow is a problem, it can make running and expanding your business a challenge. Cash flow issues can restrict the investments you can make, make it challenging to take on new jobs, or make it a struggle to even pay your employees. Unfortunately, cash flow is one of the most common problems faced by small-to-medium enterprises (SMEs). Getting this problem under control can be a big boon to your business, so if this is something you’re struggling with, consider using the cash flow hacks outlined below.

Cut Your Costs

While we’d love to say that you should start by improving the turnaround from invoicing to payment, you’re not always in control of that aspect of your business. You can encourage customers to pay you early but spending your time focusing on the areas of your cash flow where you have more control can be more effective.

One big area where you have control is over your own costs. Cutting down on where and how much you spend can provide significant relief on your cash flow. Consider if you can do the following:

• Renegotiate costs with suppliers
• Discard older technologies for more affordable ones
• Streamline software and other services
• Choose to rent new equipment rather than purchasing it
• Outsource new employees rather than hiring them
• Make more than minimum payments on debt (where allowed)
• Renegotiate payment terms with lenders

Understand Your Cash Flow Better

Often, SMEs struggle to make better cash flow decisions because they don’t have all the information they need when they need it. Modern bookkeeping software can help you understand where your money is going and where it’s coming from. By syncing up with your business accounts, many of these software options can provide you with precise, up-to-date information. You don’t have to hire an in-house accountant to access this information (which is also good news, because it saves you money!).

Schedule Your Own Payments

Now that you can see your payments clearly, you can start to be more strategic. Don’t pay things early when you don’t need to. Also, don’t neglect payments to suppliers or others that are essential relationships for your business. Figuring out the song and dance of paying your bills in just the right order is important but spending a bit of time doing so can really help. Delaying payment means keeping cash in your accounts longer. In that time, you may always receive payments.

Non-Recourse Invoice Factoring

You can skip the wait to get paid entirely with invoice factoring. A factoring company will pay your invoices within 24 hours after you send them out, and then collect the payment from your client later.

Non-recourse factoring is the most valuable for keeping your cash flow healthy. With this kind of factoring, if your client never pays and you collect some bad debt, the factoring company does not ask for the payment back from you. Instead, they take the loss. This is a huge advantage that can protect you from the risk of bringing on new clients who might not be reliable.

Reach out to J D Factors today to discuss how our factoring services can benefit your business and help to solve your cash flow issues.