Did you know that cash flow troubles are responsible for 82% of business closures globally? And that nearly half of UK SMEs say they experienced a cash flow crisis in the past year? With costs rising, even previously stable businesses are finding themselves staring at bank balances that aren’t as robust as they’d like them to be.

Given its importance in business operations, it’s recommended to take a considered, strategic approach to cash flow. In this post, we’ll run through a few of the most effective ways that businesses can enhance their cash flow.

Invoice Optimization

Making a sale is great, but that alone won’t help your cash flow. That only happens when the money is in your account. All too often, businesses find themselves with cash flow troubles even when they have a long order list.

Invoice optimization is a strategy to get your accounts receivable into your bank account as soon as possible. Some methods for doing this include sending invoices promptly, restructuring your payment terms to facilitate faster payments, and offering small discounts for early payment.

If you’re really struggling with cash flow, then you can also consider using an invoice factoring service, which can quickly put the value of the invoice in your account (though there is a charge for this service).

Consider Increasing Prices

Businesses are usually wary of raising their prices, but, when done correctly, it can be a highly effective method for improving cash flow. Even relatively minor increases — the kind that customers don’t usually notice — can make a big difference to cash availability.

This approach can be effective at all times, but it’s especially recommended right now, when many businesses are facing an increase in raw materials and other costs. If there’s a window of opportunity to raise prices without alienating customers, then it’s worth considering.

Work With a Professional

One of the reasons why cash flow is responsible for so many business closures is that business owners usually focus their energy and attention on their core services, making improvements, and earning sales. There’s just not enough time to give the money side of things the attention it deserves.

But given its importance, it’s not something that can be left to chance. Working with an accountant can help to manage cash flow forecasts, monitor costs, and reduce tax obligations, among many other responsibilities, which can make a big difference to a business’s amount of available cash. In all, it’s probably the single most effective strategy for improving cash flow.

Build Your Cash Reserves

Even stable businesses can go through lean periods. In some cases, it’s a seasonal fluctuation. In others, external events — like the coronavirus pandemic — can impact sales.

Building your cash reserves is a good way to give yourself a buffer against periods when you have less money coming in. It’s best to take a strategic approach to building your cash reserves, such as by setting targets and automatically transferring a portion of your profits to your cash reserve bank account.