7 Simple Strategies for Keeping Cash Flowing Into Your Business
We start a business to make money, right? Most people are hoping their business will bring them financial freedom. However, many small business owners aren’t exactly sure how to keep the cash flowing into their pockets. Here, Lauren’s Financial Freedom Journey shares some cash flow strategies that can help:
#1 – Work with a credit union.
Working with a credit union instead of a bank often means key advantages to small business owners. A few of the potential perks include free checking, personalized service, better interest rates, and more reasonable fees for the services they perform.
*Lauren’s Note: I use a credit union for some of my business and personal accounts. My personal checking accounts there get paid rewards and my business account at the credit union doesn’t have a monthly fee like the bank business checking does.
#2 – Draw in more customers.
Using cost-effective marketing tools will help you draw in customers without spending a bunch of cash in the process. For example, you can create a high-quality logo using Adobe’s free graphic logo design tool, which doesn’t require a design background. Simply choose from a variety of templates and fonts to create a bespoke logo — at no cost. You can also rely on your favorite social media platforms to grow your online presence for free, or spend a little extra to use their advertising services.
#3 – Create a business entity.
In the beginning when you’re an entrepreneur chasing financial freedom, you may be wondering whether you should register your business as an LLC. Sometimes changing your business structure to an LLC can save you money. Basically, this is a business structure that is very simple and quick to establish. What’s more, it’s inexpensive to start, and it can help your cash flow in the long run, thanks to a number of tax advantages. Instead of doing the legwork on your own or hiring an attorney, you can use company formation services to register your LLC.
*Lauren’s Note: Different states charge different annual LLC fees. Having an LLC California is over $800 a year whereas Hawaii is under $50. Overall, I have found receiving income via my business EIN (through an LLC), rather than my SSN, continues to benefit me.
#4 – Incentivize early payments.
Everyone loves to feel like they are getting a good deal, and your customers are no different. Why not offer them a discount for paying their bills early? This can be particularly tantalizing for larger invoices or long-term arrangements. When offering discounts, Yoast recommends being particularly thoughtful about your wording. Test drive a couple of different styles to see what seems to work best for your audience.
On the flip side, if your own suppliers don’t offer discounts for early payments, consider requesting longer payment terms. It’s a great way to free up some monthly cash flow without going further into debt. Or, ask them to consider offering you a discount for early payment if that is more to your advantage.
#5 – Require down payments.
If you receive an especially large order or a custom one, it makes good sense to require a down payment. Consider it a security deposit to ensure you don’t do the work without receiving any income in return — particularly wise if your end product will have limited appeal because of being tailored to your customer’s specifications. In such cases, consider requiring at least 50 percent of the purchase price upfront.
And again, there is a flip side. For your own vendors with whom you have a long-standing relationship, ask if you can forego their down payment terms. As American Express points out, how well your negotiations go will reflect on the relationship you have established with your vendor. Cite your excellent history and faithfulness; there’s a good chance you can get a bye for at least one round.
#6 – Stage payments.
It’s not unusual for a business to have a policy against down payments. However, that doesn’t mean you need to foot your initial costs indefinitely. Instead, create a staged payment contract that works to your benefit and helps cash flow.
If you’re creating a prototype, for instance, you might require 15 percent at the end of the sketch work, 25 percent more with the completion of a schematic, another 25 percent following a 3D mockup, and so forth. Just be sure to delineate the schedule in the contract.
#7 – Watch out for scope creep.
Do you offer products with conditions attached, or is a service you provide ongoing? Make sure your contract outlines your duties with specifics. Otherwise, it’s all too easy for the upkeep involved to peck away at your revenue — i.e., scope creep.
For example, if you design websites and offer hosting that includes updates, be very careful about the updates. A client who sends daily changes will be a time drain; you might include what types of specific changes are included, how many changes, and/or how much time you are willing to dedicate to those changes as a part of your agreement. How much is your time worth?
BONUS – Create a success plan.
It’s one thing to think about your business strategies and cash flow best practices, though it’s another to create a roadmap that will help you along the way. By establishing firm processes, you can make decisions with confidence, knowing you’re carving out a path toward your ultimate goals. Financial freedom here we come!
Are you ready to ramp up your cash flow? Explore the seven simple strategies outlined above.
Entrepreneurship to Financial Freedom
You may have some of those resources already available, in the form of your own skills, talents, and ingenuity. This can give you a great boost when starting your own business! You can also explore Lauren’s Financial Freedom Journey for more tips and guidelines in improving your financial situation. Lauren is a huge advocate for starting your own business so reach out if you’re going along that journey!
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Guest Post by Katie Conroy
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Need to transform and revamp your financial strategy? Check out Lauren’s Financial Freedom Journey for valuable resources, advice, and guides on growing your wealth while living your best life.