Positive cash flow is an essential component for sustained and long-term business growth. Being cash flow positive as a business simply means that more cash is coming into the business, than is going out.
Of course, this means that a business is sustainable financially and that the revenue coming in can do more than just cover costs, but actually fuel growth and enable further investment.
But how do you help to improve your cash flow position and generate positive flow?
Here are 11 strategies for doing just that.
11 Ways to Generate Positive Cash Flow
1. Bootstrapping Your Business
Small businesses who seek creative ways to acquire and use assets or resources can avoid having to borrow money or raise equity through other means. This is referred to as bootstrapping and it is an effective way to ensure your business is as cash flow positive as possible. In general, the more you can reduce expenses in your business and resist the urge of the business loan safety net, the better.
2. Review Your Pricing
Bringing more cash into your business is one half of the positive cash flow equation. Raising prices is one way to immediately improve your cash flow position. Industries and markets that are highly competitive might need to be given some consideration as to how to go about this. Tiered pricing for new, compared to old, clients is one option. Or you could try testing out a price increase on some products/services before rolling it out across the board.
3. Review and Negotiate Vendor Terms
The terms and conditions of your agreements with vendors shouldn’t be crippling your business’s ability to maintain a positive cash flow position. Consider re-negotiating more advantageous terms or exploring longer term arrangements with more favourable conditions. Reducing the costs and lost capital in your vendor agreements is a simple, though not necessarily easy, way of generating positive cash flow.
4. Invest in Tech
Technology is ever evolving and improving. Keeping an eye out for ways in which tech can improve your production and operations whilst reducing cost can be an effective way to both decrease expenditure and increase production levels. The more you can do both of those things, the more positive cash flow you’ll be generating.
5. Delay Expenses
Cash flow in a business can wax and wane, especially when your customers/clients are less than dependable. If there is a delay in your incoming cash, delay your expenses accordingly without reneging on your agreements. This gives you greater control and balance of your cash flow position.
6. Invoices Should Be Sent Early
On the flip side of the above strategy, make sure you send your invoices as early as possible. The earlier your invoices are sent, the earlier they can be paid and the more positive cash flow will be coming into your business as soon as possible. When it comes to bringing money into the business, don’t delay!
7. Introduce Premium Services
Premium products often require little more investment and development but can offer outsized financial gains. Even service bundling can drastically increase positive cash flow as the spend-per-client increases without much or any increase in the cost per client acquisition.
8. Referral Programs
Cash flow positive businesses are growing businesses. And referral programs are great ways for increasing sales, growing customer/client bases and increasing conversions. Offer your current customers an incentive to refer you and your business as word-of-mouth marketing is one of the most social proof and effective methods of growth.
9. Improve Productivity
In many cases, businesses are sitting on unrealised value in the form of unrealised productivity. Investing in system implementation that improves operations and in turn productivity can generate better and more positive cash flow. If you can identify ways in which your staff can work more efficiently and increase output, you’ll be better positioned to start generating positive cash flow.
10. Audit Your Inventory
Inventory or stock that are not selling well or not selling at all are locking up your cash flow and affecting your net position. Consider selling this inventory at a discounted price or bundle them up with another of your offerings. In the future, move away from the products or services that do not sell so you can best utilise your assets for those that do.
11. Invest in Relationships
Long-term business relationships are essential for long-term sustainability and growth. Working with vendors and suppliers, and other partners, in a mutually beneficial and amicable way allows more favourable terms and conditions and better outcomes in negotiating. Strong business relationships built on trust can be mutually beneficial for all parties.
ScotPac – How we help you achieve positive cash flow
Advocacy
ScotPac doesn’t just provide a range of customisable working capital solutions for businesses of all sizes. Our team also engages in proactive advocacy work where we represent the best interests of our clients. From lobbying activities to initiatives such as the post-covid Bounce-back Campaign, our work gives us better insight and understanding to ensure our clients can access effective solutions for improving their cash flow position.
Use of Technology
Our dedication to investing and using technology allows us to increase the speed at which we help our clients. Faster documentation, partner and client portals, along with a sophisticated tech roadmap are just some of the tech-enabled experiences we use to help our clients achieve their business growth goals.
Strong Social Proof
ScotPac has worked with businesses both big and small, simple and complex, and our success stories and client case studies offer plenty of evidence of the efficacy of our financial solutions. Whether you’re looking for tailored working capital solutions or simple strategies to increase positive cash flow, make sure you turn to the team more and more ANZ businesses are depending on: ScotPac!