• Feature

Strategies to Help You Increase Cash Flow in Business

by Linda Onyinyechukwu

September 18, 2020 1

Successful SMEs in Nigeria understand that increasing cash flow in their businesses is more or less the greatest trick a business owner will ever learn. If your sales grow each year rapidly, then you must certainly be doing a few things right in your business. But even when you’re steering your business in the right direction, you can still encounter cash flow problems if your finance or investment operations aren’t running as efficiently as you imagined.

A cash flow problem arises when a business struggles to pay its debts as they become due. Put differently; if your business debts become due and remain unpaid before your payments from your debtors are made, you’ll face cash flow problems. This means that you won’t be able to pay your bills on time, which can further complicate matters for you, especially by calling your creditworthiness into question before your suppliers.

It is possible to make profit as an SME in Nigeria while simultaneously having negative cash flow. This is not a good position to be because no matter what products or services you render, as a business owner, negative cash flow can only translate into a severe headache for you and your business. You must take the time (and effort) required to manage your cash flow, making positive changes when necessary. 

1. Provide Incentives For Your Customers.

One of the ways to increase cash flow in business is to offer your customers incentives to stick with your brand. All customers appreciate good incentives, and this can come in various forms. You can provide periodic discounts to customers who always pay their bills on time, and you can incorporate interest rates to customer bills that have gone neglected for too long. You can offer giveaways on select occasions to your customers, or you can make them hampers for festive occasions. Suppose you offer your customers more expensive recurring products or services discounts when they pay ahead of time. In that case, you establish something that is a win/win situation for yourself as a small business owner and your customers. Your customers will feel valued, and these moves will encourage them to get their payments to you early. All of which will increase your cash flow in business immensely

2. Reevaluate Your Product Prices.

Another great way to increase cash flow in business is to review your product prices periodically, this might mean raising your prices from time to time. While you may be concerned that your sales will suffer if you raise your price too high, try to remain open to discovering what your target market can bear. I understand that sometimes increasing your prices might temporarily chase away some customers but to increase your cash flow in the business; you need to experiment with pricing to find the number perfect for you. In addition to knowing how high your customers are willing to go with you, evaluating your prices will also show you what products you’ve been selling for too little and which item could be sold for a bit more. There is no guarantee that increasing the prices of some products won’t mean losing some sales, but it could also mean an increase in cash inflow and you won’t know unless you take that chance. 

3. In a Choice Between Buying and Renting, Choose the Latter.

SMEs in Nigeria are sometimes confronted with juicy property deals for their businesses but more often than not, buying a commercial property result in negative cash flow not just because real estate is a lot more expensive than renting but also because it will take much longer to recover the purchase prices of the property purchased. Unless a lot of cash backs up your SMEs, you need to maintain cash stream for the day-to-day operations of your business, so if you have to choose here, go for rentals. This is not only peculiar to real estate; you can rent office equipment and certain supplies as well. Even though renting might end up costing more in the long run than an outright purchase, if you pay in small increments for a stipulated time, it can increase your cash flow in the business.

4. Track Your Records More Efficiently.

Thanks to the internet, there are easier ways you can track your business expenses, investments and accounts more efficiently. The days of noting business operations on paper are long gone, and today, many SMEs in Nigeria are using various accounting software to stay on track with and increase cash flow in their businesses. 

If you own an SME in Nigeria, using an invoicing or accounting software such as this can help you organise and register all incoming and outgoing payments quicker.  It can also automate most of your business processes (for example, by matching payments to invoices) while allowing you to have a holistic overview of your business structure at all times. This is an important step if your aim is to increase cash flow in your business.

5. Make It Easy for Your Customers to Pay.

A variety of payment options matters a great deal if your aim as a business owner is to increase cash flow in your business because the easier and more convenient you make it for your customers to pay you, the faster their payments to you will be. If you’re serious about making it easier for your customers to pay, you will triple your business sales in no time and to do this, encourage them to pay with the credit cards, debits cards, and mobile bank transfers. 

If you cater to international customers, PayPal will help pay you faster. It might not be practical to offer every conceivable payment method to your customers. It is advisable to ask your target audience which payment methods they prefer and work towards making it available.

6. Review Your Marketing Strategies

This is important because some SMEs in Nigeria are too quick to blame their woes on their customers and the state of the country. I agree that the Nigerian business environment is harsh. Still, when you review your marketing strategies, you might be surprised to learn that the problem isn’t from the government or your customers but you.

You need to capitalise on an efficient marketing strategy to increase the cash flow in your business, it is crucial to be visible to your target customers at all times. Review the work you’ve done so far and figure out how you can make social media work better for marketing your business.

Finally, understand that running a successful business is a game of revenue, profits, and expenditures. If those metrics are not balanced, then your job as a business owner would be made even harder by a negative cash flow problem. Take an honest look at your business and how you’re running it. Using some of these strategies will sustain your cash flow and help you to avoid long term potential financial issues.