One of the biggest hurdles most businesses face is positive cash flow. Figuring out how to balance business growth and finances is not only challenging but almost impossible when scaling up. Many failed business owners cite cash flow problems as the reason they didn't make it.
Although you know you need money to order big inventory and seek big orders, you also don't want to swim in debt and wind up with huge payments that never quite start on the principle of the loan. Landing a contract with Walmart might sound like a dream, but when you realize they want you to provide inventory before you receive payment, the scramble to get enough inventory seems insurmountable.
Ideally, your business would have the cash on hand for you to do the things you need to do without having to take out a business loan. One way of ensuring you can do that is by seeking out positive cash flows that bring in enough funds to keep you moving forward.
How Does Positive Cash Flow Effect Business?
According to the World Bank, around 90% of businesses are small and medium enterprises. Large corporations are less likely to struggle with the funding to expand or keep the doors open during lean times. Positive cash flow has a significant impact on SMB, so knowing ways to ramp up how much you have coming in can lead to long-term success.
While there are many different ways to bring cash flowing into your business, there are a handful you may be missing out on. Consider these four positive cash flows when scaling up your company.
Operating
One way you can turn negative cash flow into a positive is by cutting expenses. If your books aren't balancing, you're spending more than you're bringing in. In the beginning of a startup, you may find you spend more money than you'd ever hope to earn. Many entrepreneurs don't even pay themselves the first few years in business.
Cut costs by analyzing where you're spending your money. Do your supplies demand cash on delivery while you offer your clients 30-days net? You've set yourself up for disaster. Change your payment requirements and seek out some suppliers that give you 30 or 60 days to pay on your orders.
Another thing to seek out is rebates on equipment or things you must buy to get your business up and running. You may even take out a loan and still get money in pocket in the early days. One example of where to find rebates might be via the fleet vehicles you buy for your business. Even the equipment you install in a van might have rebates on it.
Investment
Is your company making smart investments? Ideally, you'll put your money on things that pay off fast and have a steady profit. Don't try to jump on the latest get rich quick schemes-they almost always fail. Instead, look for opportunities to earn a small interest and build positive cash flow over time.
If you don't already have a rainy day fund for your business, you should. Where do you keep that money? If you have it in a money market account, earning 3% or whatever the current market rate is, you've invested wisely. The money is safe but you'll also make a little on savings you need anyway.
Sales and Revenues
The coronavirus pandemic hit many small business owners hard. Data for Good estimates around 31% of small businesses in the United States are not operational, many as a direct result of COVID-19 shutdowns. Others still struggle to stay afloat.
In a difficult landscape, how can you keep your cash flow positive and keep customers buying? First, look at what you sell. Is it something people feel is necessary? If you sell luxury goods, frivolous fun and such, you might find your sales start suffering. It might be time to shift your inventory to something more essential.
You also must look at old unpaid debts owed to you. Who has an outstanding invoice? Do you have clients taking advantage of your credit extensions? It may be time to change your policies. Sure, you might risk losing a few clients, but if they're creating a financial pinch for you, you can just replace them with customers that pay on time.
How can you ramp up sales? Look at what your competitors offer and see if you lack in any areas. Try to find a unique value proposition (UVP) that stands out from everyone else in your industry. Run specials and sell off old inventory that isn't moving. Sometimes it is better to break even than to let inventory sit too long.
Loans
Another way to add an influx of cash into your business is through loans. However, this should be a last resort for your business. You will have to make payments on the loans. When the money comes due, you might find your already cash-strapped business can't handle the added payments.
A couple of other options could be letting your employees buy stock, asking family and friends to invest or finding angel investors willing to wait on their return when your business has more cash flow.
Finding Your Solutions
Every business runs on a different model. The cash flow types that work for one brand might not work as well for you. Think about the things that helped bring in money for you in the past. It could be a special event drawing new foot traffic to your brick-and-mortar store, for example.
Once you have a few ideas in mind, implement them one by one. Track success with landing pages, unique offers and by tracking inventory and customer spending. Over time, you'll learn what works for your business. In the meantime, you have to stay afloat until your profit outweighs your spending.
Authored by Eleanor Hecks
Eleanor is editor-in-chief at
