16 ways to improve your business cash flow

By Funding Options on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs

As a highly developed, market-oriented economy, the UK relies on consumers to spend, with seasonal fluctuations also having a considerable impact on the daily cash requirements of small businesses.

Here we’ll discuss methods to improve your cash flow throughout the year to avoid any potential issues and predict when you might need additional funding.

1. Explore business loans

A standard term or business loan is often the first port of call for many SMEs. Businesses decide how much they need, how long they predict they’ll need to pay it back, and are charged a fixed interest rate for the duration of the loan.

2. Create a cash flow forecast

Most of us are familiar with the yearly cash flow forecast. However, it’s wise to be more granular, by creating a monthly cash flow statement and establishing a monthly budget. Developing a disciplined approach to spending, one where you can pinpoint the ebb and flow of revenue can help you identify and avoid any potential budget gaps.

3. Invoice promptly

If you offer 30–60-day grace periods for your customers to pay their invoices, you’ll need to have a robust collections procedure to ensure this period doesn’t get stretched. You might also consider offering an early settlement discount within 14 days, at perhaps a 1-2 per cent reduction.

4. Ask large creditors for an extension

If you’re experiencing a shortfall in working capital, it might be an option to ask your creditors for extended payment terms. This isn’t a hypocritical act of opportunism; it’s effective management. These creditors could, for example, be utility firms prepared to match payment with your business income.

5. Reduce expenses

It’s good business housekeeping to check your monthly budget and identify any unnecessary spending periodically. Ensuring your outgoings are lower than incomings ensures that your business is workable and running cash flow positive.

6. Increase prices

Many businesses fear putting up prices, assuming that the customer will vanish as soon as they do. However, you might want to compare prices with your competitors to see if you’re cheaper than others. There’s a difference between what represents value for money and what’s affordable.

7. Get a business credit card

A business credit card can be a great way to help ward off any cash flow issues, such as a temporary lack of cash coming into the business, using it to pay for anything from operation costs to new stock or employee expenses.

Many business credit cards also offer rewards, such as cashback or travel points, which can help you save money in the long run. Additionally, building a solid credit history for your business through responsible use can help you secure larger financing options in the future.

8. Improve profit margins

You don’t just increase your profit margins by raising prices since the costs your business pays can dramatically affect the overall profit you generate. If you don’t manage your costs well, you’ll end up harming your business.

It’s therefore up to you to ensure you’ve completed a full competitor analysis in your market and negotiated hard with your suppliers and creditors. It’s in their interest to see you succeed, so ask what they can do to help.

9. Get imaginative with your product/service offering

You can avoid cash flow challenges by identifying your quiet times before they happen and implementing countermeasures through clever sales tactics. If, for example, you’re a restaurant suffering slow sales after Christmas, get busy by offering a discount for the third visit before Easter. It’s up to you to get imaginative to think of ways to increase sales through direct communication.

10. Maintain healthy restocking

If you’re a business that sells any products, overstocking could seriously affect cash flow. You might consider investing in inventory management software. It can tell you what’s selling, illustrate your sales pattern and suggest a workable buying pattern, including automatically placing orders.

11. Accept online and card payments

It’s a well-known fact that businesses that don’t take cards or charge a ‘minimum spend’ lose business. We’ve all walked away from shops that don’t accept cards and then struggled to find an ATM on the high street.

Applying for card processing is straightforward, and many lenders are eager to get you on board if your business is healthy and viable. You can start the application process online, and once accepted, you could be eligible for alternative finance options such as a merchant cash advance.

12. Working capital finance

You can consider taking out additional funding to prevent cash flow issues before they happen, such as looking into working capital finance or other short-term business loans.

Small Business Pro allows you to build your own sales pipelines with our tool which has been specially tailored for small businesses – all at a fraction of the cost of other CRMs.

It will also help with the heavy lifting of taking payments, insurance, finance and HR, plus you’ll get a host of personal wellbeing benefits.

You can find out more about Small Business Pro here.

13. Flexible business overdraft

A business overdraft is a set amount usually added as a facility to a current account to smooth out short-term cash flow issues. If needed, the overdraft limit is there, and you only pay interest on the amount used.

You’re under no obligation to use the overdraft, and you won’t incur any costs if you don’t use it, although you might pay an arrangement fee, and the bank may withdraw it if your credit rating changes or it’s not put to work for some time.

14. Merchant cash advances

A merchant cash advance can be structured as a lump sum payment to a business in exchange for an agreed-upon percentage of future credit or debit card transactions.

This type of funding allows for quick access to cash without the need for collateral or a lengthy approval process, making it an ideal option for businesses that need to access funds urgently.

15. Invoice finance

Invoice finance enables you to unlock cash from your debtor book, which means you get paid faster for completed work, leaving you to focus on what you do best, running your business.

This method also helps improve your cash flow without taking on traditional debt, allowing you to maintain working capital for growth or unexpected expenses while avoiding the need for loans or overdrafts.

16. Asset Refinancing finance

Asset refinancing is a method to unlock the tangible assets of the business to drive improvements in working capital and business performance.

That way, you can free up cash tied up in your existing assets without having to sell them, allowing you to cover immediate expenses while retaining ownership and use of those assets.

Is my business eligible?

From limited companies to start-ups, if your company can meet its financial obligations, then yes. There are many kinds of finance available with a lender to suit every business and every business need.

Our award-winning platform, Funding Cloud(™), accurately and quickly matches businesses with the right lender and finance option for their needs. From unsecured business loans to revolving credit facilities and a merchant cash advance, we work with over 120 lenders offering dozens of lending products. Apply for funding in minutes – our record from application to credit approval is just 20 seconds, and cash in the bank within as little as 18 minutes.

Apply today to get the funding you need to trade, plan, and grow with confidence.

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