As many as 82% of small businesses report cash flow problems as the main cause of their business failure. Thankfully, your small business can avoid this all-too-common hurdle.

As seasoned business advisors, we are here to provide some useful business cash flow solutions that can potentially help you steer clear of disaster.

Sell Your Invoices to a Third Party

Selling your outstanding invoices to a third party for a slight discount is known as invoice factoring. This practice allows you to develop an immediate influx of much-needed cash to keep your business ticking over when customers fail to pay on time.

The debt collection process then falls to the factoring company and is no longer your problem. Sure, the amount will be less than you originally invoiced your client for, but it’s better than making no money at all.

This is particularly useful for businesses with long payment cycles or for those experiencing rapid growth.

Offer Early Payment Discounts

Customers who pay early or who pay in cash upfront should be offered a discount. This is a simple, tried-and-trusted method of positive reinforcement that rewards good payment behaviour.

Not only does this practice help to build a positive relationship with reliable clients, thereby ensuring their retention, but it can also accelerate cash inflow. This, in turn, reduces the time your money is tied up in accounts receivable and keeps your business liquid.

Consider Subscription or Membership Models

The subscription or membership model is increasingly attractive for businesses that have repeat customers, as this ensures a steady flow of predictable cash income every month and minimises the possibility of cash flow problems.

Instead of one-time purchases, customers might be encouraged to pay regularly, usually monthly or annually, for ongoing access to products or services.

This kind of payment model is used with great success in gym memberships or software sales. However, a little out of the box thinking could see it used for tradies as well, with plumbers, for example, offering a monthly subscription for real estate agencies to ensure year-round plumbing service on demand rather than paying higher fees for each individual callout.

If you are looking for a suite of useful business advice, ranging from business cashflow solutions to business performance management and everything in between, then contact Advisors & Accountants today!