Written by Nick Driver
Posted on 27/01/2016

7 unconventional ways to improve cash flow

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Although not all will be right for you, some ideas could make a big difference to the balance sheet. Here we share seven unconventional ways to improve cash flow that you might not have considered before.

1. Sell your accounts receivable

Accounts receivable is an asset on the balance sheet as it signals future cash coming into the business. In reality, it isn’t this straightforward. Bad debt, late payment and the rigmarole of chasing owed cash can erode the value of the accounts receivable figure. One way of cutting your losses and improving cash flow in the short term is to sell off your accounts receivable to a third party. They will often provide cash up front, giving you that all important capital injection, and take a cut of the gross accounts receivable amount. They will chase the payment themselves, so your credit team is free to focus on other tasks.

2. Switch to a competitive cashback credit card

Improving cash flow often means stemming losses, but with a business credit card that offers cashback as a benefit, you make it instead. This does involve making a purchase to start with, but expenses are inevitable. Seek out the most competitive cashback terms to maximise the money that goes back into the business.

3. Pay early for cash discounts

To take advantage of attractive discounts, find out if your suppliers offer cash mark-downs for early payment. This might not be the right move every month, but could see you make a welcome saving when you do have the cash in the bank to pay early. 

4. Buy second hand

Thinking thrifty can save your business money that is better spent paying down debt. Expanding the team? This doesn’t mean you need to go out and spend large sums on brand new desks, chairs and cabinets. Look instead at used goods from trusted suppliers.

5. Think before you upgrade

Similar to point four, think carefully before you upgrade software or hardware to the latest releases. Is it really necessary? Or is the salesperson just good at their job? By only upgrading when you need to you can maximise the value of what you’ve already invested in.

6. Drop problem customers

This action needs a lot more thought than deciding whether or not you need that new printer. Constant late payers are a drain on your finance team’s time and resources, so if someone persists, you should seriously consider if they are worth keeping as a customer. If not, be professional when declining further business and make sure all loose ends are tied up first.

7. Create a culture of cash flow optimisation

Optimising cash flow shouldn’t only be a priority for the finance team, as everyone can play their part. For example, the sales team should be encouraged to get an answer from new business prospects as soon as possible, even if this turns out to be a ‘no’. Doing so either gets that first invoice paid sooner or lets them move on to qualify other leads.

Cash flow troubles are a serious source of risk for your business. The above may seem unconventional, but they are all tried and tested ways of keeping more money in the business.