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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.
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:
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.
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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.
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:
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.
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:
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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:
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.
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.
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Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
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