Cash flow the critical life blood of a business, especially in the startup  phase.  If you don’t have enough money to support daily operations the business will fail.  Cash flow is a measure of your business’s financial health.  It is the difference between the amount of money coming in and the amount going out.  Cash flow positive menas that you have more money coming in than going out.  Being cash flow positive means you have enough money coming in to pay your bills and keep the company afloat.  Cash flow positive should be the goal of every small business. 

 

These are the top 10 things you can keep your small business cash flow positive.

 

1.  KNOW THE BREAKEVEN POINT:

 

 

Before you can strive to achieve positive cash flow you first have to know what the breakeven point is.  The break even point is the point at which you’re not spending more money than you’re making. 

 

 

2.  GET PAID IMMEDIATELY:  

 

 

When a customer makes a purchase get paid immediately.  Avoid giving customers credit or grace time to make payments.  When you give customers credit or a grace time to make payments there is always a certain percentage of them who will not make payments and some will make late payment.  This will have a negative impact on your cash flow.  Make them pay at the time of purchase.

 

 

3.  EXTEND PAYABLES 

 

 

Get your suppliers to give you extended pay terms such as net-30, net-60 or net-90.  This means that you will have 30, 60 or 90 days to make payment for supplies after you receive them.  This gives you a grace period where you could ensure that you have the cash flow to pay for them and does not negatively impact your cash flow.

 

 

4.  BOOST SALES:

 

 

Do things to bring in more customers and make those customers buy more.  You can offer discounts, sponor events, product sampling, give aways, stay open on holidays, extend operating hours, etc.

 

 

5.  LINE OF CREDIT:

 

 

Establish a line of credit that you can tap into.  Having a line of credit that you can tap into gives you access to money that you can use to grow the business without faltering on payments or having to go into debt.  A line of credit lets you use only the amount you need to and pay it back immediately.  If you didn’t have a line of credit and immediately needed cash to pay a suppliers, you would have to get a loan which puts you in debt or you could end up with making a late payment to your suppliers which comes with additional fees.  The line of credit will keep you free from incurring these costs and maintain positive cash flow.

 

 

6.  TIMELY BILLING:

 

 

If your business is the type where you have to do the work before you get paid you need to focus on billing the customer quickly and obtaining payment immediately.  With these kinds of businesses you want to make sure that the customer pay as the work progress so that you don’t end up footing the entire bill if the customer renigs on paying later on.  Give the customer an initial estimate and compell the customer to make phase payments as the work progress.  Get them to pay 25% up front, 25% when 25 percent of the work is completed, the next 25% when 50 percent of the work is completed and the final 25% when the work is completed.

 

 

7.  PRE-SELL:

 

 

Pre-selling is getting customers to pay before the product or service is delivered.  This puts the money in your hands that you can then use to actually develop and deliver the product or service.  This prevents you from having to seek investments in order to finance the business.  Initiating a “Layaway Program” is one way to get customers to pay up front before the product is delivered.  If your business is such that you can employ this method you should use it.

 

 

8.  GET CUSTOMERS TO COME BACK:

 

 

The best source for generating more cash flow is from the customers you already have.  If you can get those customers to come back and make more purchases it will significantly increase your cash flow.  Get them to come back by establishing loyalty programs that gives them special discounts for being loyal customers.  The more they buy the more discounts they will receive.  They are already committed to buying from you anyway, so it’s an easy sell.

 

 

9.  UPSELL:

 

 

Offer a product at a low price as a way to lure the customer to your shop and induce them to purchase items that cost more.  For example, you can $1.00 beer at happy hour in the hopes that the customer will also purchase other drinks (rum & coke, etc.) at the regular price.

 

 

10.  BUNDLE PRODUCTS/SERVICES:

 

 

When customers walk into your store to buy something, attach another item to that product that will make them believe that they are getting more for a little extra cost.  If you’re a car wash business offer the customer inside cleaning in addition to ourside cleaning for just a little more.  If you’re a car repair business offer to wash the customers’ cars after completing the repairs, for just a little more money.