While it is well-known that small and independent businesses can often struggle to remain afloat, the true extent of this challenge is largely underestimated.
A staggering 96% of all ventures fail within their first 10 years, for example, and this highlights just how difficult it is to survive in any economic climate.
One of the more specific challenges revolves around cash flow, as small businesses in particular can find it difficult to sustain a viable level of working capital. In this article, we will look at viable ways in which your cash flow can be given a boost:
Consider Leasing Hardware and Embracing BYOD
Overheads are a major concern for business-owners, primarily because they drive significant costs that can significantly eat into their margins. These costs can be reduced with the implementation of an agile business model, which in turn can free up more of your capital at any given time.
This approach should influence all aspects of your business, including the hardware that employees use on a daily basis. Equipment that is intended for communal usage (such as photocopiers and printers) should be leased, for example, as this transfers the burden of cost and ownership to a third party. Photocopier rental firms are therefore liable for the cost and completion of all repairs, which can reduce the strain placed on your finances over time.
For hardware such as laptops and phones, you should consider embracing the principle of BYOD (Bring Your Own Device). This enables employees to use their own personal devices in the workplace, which is viable so long as they are accessible over a secure, wireless network.
This also transfers costs to individual employees, while empowering them to be more productive both in and out of work.
Sell Your Accounts Receivable to Third-party Investors
This practice, known commonly as factoring, is increasingly popular in the commercial world. In simple terms, it enables firms to sell the value of invoiced work and their accounts receivable to third-party investors, creating an instant cash injection that can fund business operations. Debt factoring can be crucial at times for businesses who need cash quickly but have slow-to-pay clients.
This can prove crucial for small businesses, particularly when dealing with clients that operate 60 or 90-day payment terms.
Investors are repaid when clients settle their outstanding invoice, meaning that this process represents a low-risk method of funding everyday operations. This also avoids the need to accumulate long-term debt within the business, which is especially important in the current economic climate.
Segment Various Elements of Your Cash Flow
While the term cash flow is often used generally, it actually applies to various aspects of your business.
This is why attempting to manage cash flow as a single entity is ineffective, as it can quickly become confusing and often leads to inaccurate forecasting.
With this in mind, it is far better to segment suppliers, customers and inventory when managing your cash flow, so that you can develop a more accurate insight into your core business operations and deploy cash more efficiently.
This should also make it possible to identify opportunities to save, as you look to reduce expenditure, optimise profitability and maximise the amount of working capital that is available at any given time.
