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Although there are certain businesses that can make seasonal profits and afford to close up shop during the summer or winter, the vast majority must remain open year-round in order to cover all their expenses and still maintain a consistent income. 

Even though your business may be struggling financially at the moment, there are plenty of different ways to improve your cash-flow and avoid any problems in the future. Keep reading to learn some of the most popular methods that Canadian business owners turn to in their time of need.  

Why Is Cash-Flow Important For Your Business?

In simple terms, your cash-flow is the money that’s going in and out of your business. So, not only is it the income that your operation generates, but it also relates to all your expenditures, which can include but aren’t limited to: 

  • Employee wages or salaries
  • Taxes, permits, and other debts
  • Rent or mortgage payments
  • Inventory, products, and materials
  • Equipment, vehicles, and other assets
  • Shipping, transport, and storage costs
  • Utilities, internet, and other bills

Unfortunately, if your business is spending more money than it’s making, you can quickly end up with a negative cash-flow, which will make it extremely difficult to run your company efficiently, at least for the foreseeable future. That’s when the debts start piling up and the real unmanageable financial troubles occur.  

Interested in learning how to set up an online business? Check this out.

How To Increase Your Business Cash-Flow?

If that’s looking like the case for your business, the best approach is to begin implementing the following cash-flow improvement techniques as fast as you can. That way, you can avoid as much risk as possible while simultaneously making a better profit for all the investments you’re making. 

Send And Collect Your Invoices On Time

Invoicing is often a necessary practice for collecting income from clients, especially for small businesses. In fact, one of the best ways to increase your cash-flow is to send out your invoices immediately after any orders are placed and request customer payments in a timely manner. Although collecting invoice payments isn’t always easy, you can use the following methods to bring them in quicker and maintain your cash-flow:

  • Offer early incentives or discounts – One of the simplest ways to get customers to pay their invoices on time is to knock a few dollars off their bill or offer them promotional deals. Not only will this help you collect payments faster, but it will also hopefully strengthen customer relationships, making for easier transactions down the line.
  • Charge late penalties – If you think it might be tough to collect invoices in the future, make sure your customers are aware of that specific due dates must be met and that they will be penalized for any late, short, or missed payments. Introduce a strict policy about how much and when customers will be charged. What better way to let them know that you’re running a serious business? 
  • Send reminders – If customer confusion is the problem, all you have to do is call your clients or send them emails regularly to remind them when invoices are due. There are even some accounting programs that allow you to send automated reminders to your customers on set dates.   
  • Implement invoice factoring – If waiting for your customers to pay is not an option, you can also sell your unpaid invoices to an invoicing company, who can offer you swift cash payments for a portion of the proceeds. In fact, this may be the fastest way to improve your cash-flow through invoicing. 

Reassess And Mark-Up Your Pricing

If your cash-flow isn’t as high as you’d like, it might be because you’re charging too little for the products or services your business provides. Although increasing your prices could cause a decline in clientele, keeping them too low might make you lose money or only break even after inventory and operating costs are factored in. 

So, the next step would be to take a look at what your competitors are charging, then reevaluate all the products or services in your repertoire, weed out anything that isn’t performing well, and mark-up the price of the most lucrative commodities. 

If necessary, you can also decrease the price of any less profitable items so you can get rid of them quickly and restock your storage space with a better inventory (learn more about inventory management). Just be sure to pay your staff appropriately and keep your prices as competitive as possible.

Stay Friendly With Your Vendors And Suppliers

While it’s important to treat your loyal customers well, it’s just as essential to maintain a solid relationship with the parties that supply your inventory or sell your products and services to the general public. Here’s what you can do to improve cash-flow in this area:

  • Vendors – If there are no late fees involved and you aren’t risking any ill will or drops in your credit rating, you can start by deferring your payments for 45 – 60 days from your invoice dates, in accordance with the condition of each sale. Just make sure that you eventually pay everything you owe and keep the vendor informed of any payments with expected delays. 
  • Suppliers – Once your vendors are taken care of, you can go over any contracts you hold with various suppliers and renegotiate any unappealing terms. You may even be able to secure discounts on products or services if you offer early payments or trade/buy items in bulk. After all, you could be working with these suppliers for years and it will benefit them to keep you on as a preferred client. 

Need extra funds to pay your suppliers? Try these small business financing options.

Manage Your Equipment Properly

Having access to the right equipment is another effective way to see that your business earns a consistent cash-flow. That said, some tools, vehicles, and heavy machinery can be very expensive to purchase and operate, particularly if the items are brand new or too advanced for your budget to handle.

While it’s also not a great idea to hold onto outdated, damaged, or unreliable pieces, there are a few things you can do to manage your equipment more efficiently, such as:

  • Repair and maintain existing machines – Remember, new equipment can be extremely handy but far too costly to pay for upfront. As such, it may be smarter to repair and replace parts on the pieces you already have, at least until your cash-flow allows you to afford the latest tools of the trade.  
  • Purchase second-hand items – If your old equipment breaks down but new pieces are still beyond your budget, there are plenty of wholesalers and auctions in Canada where you can find used items for a fraction of the price. These pieces are often the result of foreclosures and while they may be older models, they should work perfectly fine. 
  • Lease your equipment – Rather than paying for your machinery right away, you can choose to lease it, which may be more cost-effective because you can make smaller payments over several years. Not to mention, you can write it off as a business expense during tax season, then return it when your lease ends. Similar to vehicle lease programs, some equipment dealers will even throw in extra incentives, such as warranties and free on-site repairs.
  • Sell any non-working or outdated items – If the main problem is that your equipment no longer functions or has become obsolete (which is common with computers and other office gadgetry), there are still people out there who are willing to buy the items and harvest them for parts. Some metals and materials still retain value, even if they come from a used tool, machine, or vehicle.

Finance Your Business

More often than not, a business is far too costly to pay for using your personal savings. In that case, acquiring financing through a bank or alternative business lender can help you access capital immediately and generate the right cash-flow as a result. Although there are many types of business financing products that you can apply for in Canada, two of the most common solutions are:

Business loans – A lump sum of money that is deposited directly into your bank account and repaid through installments, typically with fixed interest rates. While you can make payments over several years, the average business loan term is shorter than other financing products, making it good for large and less frequent expenses, such as equipment financing, mortgage costs, and high-interest debt consolidation. 

Lines of Credit – This product allows you to dip into a revolving credit limit and make monthly balance payments, usually with a slightly higher variable interest rate. This option is sometimes more appealing because you’re allowed to make minimum or multiple payments every month. The average repayment term is also much longer, even open-ended in some cases, making a business line of credit perfect for smaller recurring costs, such as taxes, permits, utilities, and restocking your inventory.

Don’t Let Your Cash-Flow Dwindle, Call Loans Canada Instead

The methods listed above are just some of the ways that you can improve and manage your business cash-flow. If you’re looking for extra financing to help cover the cost of day-to-day expenses or a large expansion, Loans Canada can help match you with the right option and the best lender.

Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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