5 Ways to Turn Around Your Negative Cash Flow

Negative cash flow occurs when a business has more money going out to creditors than they have coming in, in the form of payments from customers. If your business has a negative cash flow, you need to get it turned around as quickly as possible. If you have a negative cash flow for long enough, you will most likely be going out of business soon. Here are a few ways to help turn around your negative cash flow.

1. Cash Discounts

In order to increase cash flow, you have to increase the amount of cash that you are bringing in. One of the best ways to do this is to offer cash discounts to customers. Instead of offering them payment terms or some other method of payment, tell them that you will give them a discount if they pay cash. In many cases, this prompts the customer to come up with the cash that is necessary so that they can save a little bit of money. Even though you are giving up one or two percent on the transaction, you are getting the cash much quicker so that you can use it.

2. Avoid Slow Payers

In many cases, you may have relationships with customers from the past that do not pay their bill quickly. If they are not a vital account, you might want to avoid doing business with them. Even though you can get a sale from them, it may not be worth it if it takes them a year to pay. Try to focus on accounts that pay quickly.

3. Quick Deposits

Another simple technique that you can use to increase your available cash flow is to deposit every payment the same day that it is received. Sometimes, business owners keep checks for a few days before getting them over to the bank. If you want your cash flow to be better, you need to get in the habit of taking everything to the bank at the end of the day. You might also consider working with a bank that offers remote deposits. With this technology, you can actually scan a check and send the image to the bank and they will deposit it without you ever coming in to deposit it. 

4. Reduce Inventory

One of the most common mistakes that businesses make is that they keep too much inventory on hand. They think that they need a certain amount of inventory, but in reality, it sits in the warehouse for months. This inventory is tying up cash that you could have in your bank account. Try to get rid of the inventory that you have and keep the inventory at a low level. With shipping today, you can get most of what you need within a few days.

5. Analyze Your Expenses

You should also make every effort to analyze what you are spending your money on. Many times, businesses are not efficient when it comes to keeping track of your expenses and end up wasting a lot of money. If you can cut back on just a few unnecessary expenses, it may make a huge difference for you.

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