It can be challenging for small business to get financing or third party funding however, having finance strategies to grow your small business will help take your business to the next level
With this in mind, you will need to generate positive cash flow to reinvest it back into the business for growth
Do not make the mistake of placing other business goals ahead of your cash flow
And while it’s crucial to focus on your product and generate sales, if you don’t have money, your business will not be successful
A good rule of thumb is keeping aside 20% of your revenues to reinvest into the growth of your business
Here are the 5 Finance Strategies to Grow your Small Business
1. Create a budget
You have to know your financials and get to know them well
With this knowledge, you can quickly and accurately determine how to increase your cash flow
You can hone in on areas that could be run more efficiently and as a result generate more cash
Creating a budget does not have to be difficult, but it’s one of the best things that you could do for your business
For example, you could consider offering discounts to help attract new customers. However, when you tally up all your expenses, you could quickly determine that by discounting, you will sell at a loss and will hurt your business. Without a budget, making these types of decisions is difficult.
2. Increase Prices
Raising prices is tricky and should be rolled out with a good strategy at hand
Typically, a price increase of 10% or less will go unnoticed by the customer
However, any price increases greater than 10%. will entail communication to help with adoption.
Look at what your competitors are charging. You want to stay competitive
If your prices are too low, you could be selling yourself short and come off as cheap
3. Collect your Accounts Receivable Timely
Following up on unpaid invoices will increase your cash flow.
Sending invoices promptly. You can’t get paid if you don’t send out invoices
If invoicing is manual and tedious, consider switching to an online system such as Quickbooks or creating a standardized template
Getting paid before providing services is worth considering. Alternatively, requiring a deposit is standard practice.
Put a strategy in place that encourages quick payment from your customers such as:
- Penalties for late payment- be upfront about how much will be the penalty and when it will be applied
- Constant invoice payment reminders – send your customers a reminder a couple of days before the invoice is due, another reminder on the day the invoice is due and another reminder the day after the due date. Keeping contacting the customer until the invoice is paid
- Incentives for quick payments – give a small discount to your customers for paying their invoices faster
- Limit customer credit.
4. Expand your market
Consider if you have other products or services that you can add that could complement your business. This will give you an additional source of income
For example, you could sublease some of your office space if you have extra space that you are not currently using
Thinking outside the box in terms of your marketing strategy could add additional customers to your business. Locally sponsored events while partnering with other vendors could be a low-cost way to get your business out and ultimately acquire more customers
Advertising related products to your customer base could generate additional cash. Or you can upsell to your customer base additional products.
5. Expense Efficiency
While focusing on increasing cash flow coming into your business is important, just as important is reviewing cash going out of your business
A careful review of expenses and cutting unnecessary expenses can be hard but worthwhile to preserving your business cash
Looking at cheaper alternatives for the same or similar quality is a good exercise to cut cost
Negotiate with vendors to get discounts or lower pricing
Purchase supplies in bulk to get better rates and discounts
These 5 tips, if implemented can help you generate more cash than you can reinvest back into your business for growth.