Fast cash strategies: How to generate money in urgent timesBlog, 02/02/18
Ever been in a situation where having immediate cash is necessary?
We know how that feels and it is a situation that every budding business owner will encounter once or twice in their lifetime; don’t feel bad if it happens to you, it will suck but it is something that you have to learn to overcome if it does (inevitably) happen again.
In this post, we’re going to teach you how to do that with some tips and strategies for you to get fast cash for your business.
Why does this happen?
During the first few years of your business, you may enjoy a healthy and balanced cash flow with minimal issues along the way.
The real issue happens when there is just enough money to keep the business profitable, which means it could take up to years for you to save enough cash to scale and achieve bigger goals.
You could have zero issues with your cash flow but the saying is true, you need money to make money. This means having a decent cash flow is not enough, you NEED more money.
Fortunately, you aren’t in a lose-lose situation. There are dozens of ways for small businesses to get fast cash and a few of them are fast and relatively easy.
Here are some of them.
Get a merchant cash advance
Small businesses have the ability to seek for merchant cash advance when the cash flow is in desperate need.
Getting a cash advance nowadays is convenient and simple; your merchant provider loans you a fixed amount of your expected credit or debit sales. The loan is repaid through monthly payments taken from your credit and debit transactions.
Unlike traditional loans, there is no fixed monthly amount to repay. Repayments are instead aligned with your credit card turnover. When business is good, you pay back more, if it’s not doing too well, repayments are lower to meet your daily credit and debit card sales.
If you hate paperwork, you’re in luck. Little paperwork is involved for this service and almost every business is approved for advances as long as your business is legit and there is proof of actual money coming in.
Funds from merchant cash advances are usually deposited in a day (which is extremely quickly) and are also repaid faster than bank loans. It would take a business roughly 6 months to pay back their loans in general.
However, you have to make sure that you can pay back the loans. This means you need to have invoices sent out and more business coming in. A cash advance is going to hurt your business more if you don’t have means to pay it back in the future.
Selling your invoices (invoice factoring)
If you’ve worked in a B2B business that deals primarily with clients, you should that know that invoices can be sold to a third party, also known as invoice factoring.
It’s not illegal or looked down upon either; invoice factoring has been around for years as a way for businesses to balance their cash flow.
This service lets you sell your unpaid invoices or accounts receivable to a third-party invoice factoring company. They will buy your invoices at a lower rate e.g a $1,000 invoice may be sold for $800.
While you might not be getting a full return on your invoices as you would if you waited for your clients to pay up, you can use invoice factoring when you desperately need cash and have no time to waste.
Again, funds are received extremely quick. Most providers will buy your invoices and hand you cash in less than a day.
Apply for micro-loans
Traditional bank loans for small businesses are usually in the 6-figure range with million-dollar loans being common in the market. The numbers are high because traditional loans are all about helping a business to start off by buying equipment and supplies.
When you are looking for a way to boost your cash flow, however, you probably don’t need 6-figure loans. Instead, you should look for micro-loans which work the way it sounds.
Startups around the world are partnering with lenders to help small businesses acquire small amounts of cash immediately, from $100 loans to a few thousand dollars with manageable interest rates.
It isn’t necessarily helpful if you are looking for a significant cash boost to grow your business, but it is nice to have if you need a few hundred here or there to pay your debts or repairs.
Acquire a line of credit for your business
Just like how a credit card can help you make large purchases, your business account should have a line of credit for times when you don’t have enough cash to make a purchase or fulfill an invoice.
Like credit cards, businesses have a credit limit of about $100,000 in general, depending on your credit history. You also make monthly payments similar to credit cards for business loans.
The main benefit of a line of credit for your business is that it is not necessary to use it. Even if you have a $500,000 credit, you can decide not to use it and you won’t be charged a dime.
So, only use it when you really need it or you are going to suffer from interest rates you can’t afford to pay.
Bootstrap your cash flow
It’s not always a good idea to mix your personal and business finances, but if your business needs cash right now, you might have to use your own money to fix the issue.
You will have more control and flexibility over your business’s finances by using your personal savings accounts, but you also risk personal debt or bankruptcy if you struggle.
You might also get help from friends and family for financial aid, but you are risking their money and your relationships with them by asking for money. This option is tough and risky, but it can pay off if you plan your financial strategy correctly.
Run an irresistible offer
One of the fastest and easiest ways to bring in immediate cash flow is to run a sale or offer for your business.
You might think that service businesses cannot run a sale but that’s not correct; for example, you can run a $97 offer for a popular service in your niche. If 100 people take up on your offer, that’s almost $10,000 in cash flow with zero loans.
To make it even more effective, instill urgency by making the offer for a limited time only so people are forced to buy now or risk missing out.
Be careful, however, to not ruin your business model just to bring in some quick money. Although you’re running a discounted offer, it should still be profitable for you and it should be a part of a funnel to upsell your other services.
Cross selling and up selling
Remember this, selling to your existing clients is cheaper and more profitable than selling to new clients because their customer lifetime values are higher.
Instead of spending money and time convincing new people to buy your services, why not look to clients who have already bought from you and trust you to make their life better?
You can either sell a better offer of your current program (ie. a 4-week program on top of a 1-week training program) or sell related products and services to complement your offering (gym equipment and supplements for your coaching business).
It’s simple to upsell, just get in touch with your current clients, listen to their problems and offer them a better solution with your offers. You can do this through e-mail, phone calls, or face to face meetings.
Go through your accounts and records book
Your accounts book is supposed to tell you who owes you money, how much you are owed, and when you are clients are supposed to pay.
Here’s why you should go through your books regularly; a law firm recently went bankrupt not because of poor performance, but because 70% of their client base has not paid their invoices yet.
When you have an overdue invoice, it’s time to toughen up and start calling these clients to make sure they pay their bills. Business owners tend to be afraid of reminding their clients about invoices – why should you?
It is their responsibility as a client to pay you for your services and time. Do you go into a restaurant and hope to pay the bills a month later?
Of course, you want to maintain a good relationship with your clients but you’re also running a business, not a non-profit or as a charity for your clients. You have bills to pay too.
For future clients, you may also want to run a credit check on them before you offer terms that allow them to extend the payment window.
Offer clients an incentive for paying swiftly
Businesses usually have a policy of paying invoices after 30, 90, or 120 days to help with their records.
In general, the bigger a client is, the longer you’ll have to wait for your payment as they usually go through several departments before a transaction is made.
A good way to bypass this wait is to offer an incentive or bonus to clients who pay early.
Depending on what your margins are and how badly you need money, you can give a discount of 2-5% of the invoice if they pay quickly instead of waiting for a month.
Some clients will take up on your offer as it saves them some money which is always great for a business. At the same time, you’re also receiving money instantly at the cost of small profit losses.
Speaking of invoices, it is a good idea to send your invoices out as soon as your job is done. The longer you wait to invoice, the longer you wait to get paid!
This happens because a lot of entrepreneurs and business owners are so busy running their businesses that they put off administrative tasks like invoicing for later or to someone else.
Sell excess inventory in your office
If you have equipment or inventory that you do not use and is just taking up space, try to sell it off for quick cash.
For example, if your office has a Mac or MacBook that is barely used, selling it off can net you about $1,000 even if it’s used. Another thing that you can do is to rent out unused space in your office to startups or businesses.
The idea is to sell your asset to a company which gives you immediate money but then you create a lease arrangement where you pay an ongoing fee for the right to use the asset.
It will increase your regular payments out but gives you a monetary injection that you can use to help solve an immediate cash crunch.
You may not get massive amounts of cash but if it’s not being used, you may get some returns on it by selling or renting for some cash.
However, do not sell things that you’re going to use in your business even if you’re desperate for cash.
It sounds great but in the long run, inventory that you will eventually need that is sold for peanuts will have a negative impact on your business.
Ask for referrals or create a referral program
Another effective way to boost cash flow through sales is to ask for referrals from your existing clients.
Existing clients know you, trust you, and appreciate your ability to serve them well. Hence, they might know someone else who could also benefit from your services.
You can come up with a referral program with incentives like discounts or just do it the old way; call up your best customers for a cup of coffee and have a chat with them to recommend other people who might need your help.
It really depends on the customer – some like the recognition and others give you referrals because you asked them to.
Either way, getting new clients in the door is a great way to improve both the short term and long-term cash flow of your business and referrals are one of the best ways to get ideal clients on board.
Host a webinar or a 1-on-1 consultation program
If you’re looking for a sure-fire way to bring in cash without much effort in advance, webinars and 1-on-1 consultations may be a good choice for you.
You don’t need a lot of lead time or fancy marketing systems to run this option. In fact, they are so simple that they can be conducted with a computer, in person or by phone – that’s all you need.
Besides, webinars also increase your value and authority as a business owner. Your clients want to pay more for personal interactions and hand-holding with their problems.
That’s not all, clients get better results when they get 1-on-1 advice and these things don’t take up much of your time. You also don’t need to travel if you’re not doing face to face meetings, isn’t that nice?
All you need is a landing page to upsell your 1-on-1 consultations and webinars to your existing clients. You can also tweak the same page to bring in new clients.
Ideally, you’d want to preach a topic and structure to support your clients around your coaching program and turn it into materials for your calls.
To come up with great ideas, think about what problems you can quickly solve for your clients. Teach your clients how to overcome a specific problem and offer them actionable solutions that can be done right now.
A way to do this is by offering your expert advice and also by brainstorming with your client. When you brainstorm with clients personally, it helps them quickly see solutions to overcome their obstacles and you’ll build a stronger bond with them.
How to avoid cash flow problems in the future
Perform regular cash flow forecasts
The first thing you should do is to understand where your cash flow currently stands and where it is likely to go in the future. Often times, small businesses aren’t prepared for the costs associated with growing quickly.
You should that growing your business and having more sales could mean more employees and a bigger inventory. All of that is money going out of the business.
The burning question is, when will the money come back in?
Too many small businesses companies get overwhelmed by their cash flow which is easily solved if they really took their time to analyse and plan their cash flow.
A cash flow forecast is as simple as using pen and paper to predict your transactions. If you’re looking for a more organised approach, there are several web apps online that allow to you to plan your cash flow.
Remember to forecast your cash flow for at least 12 months ahead.
If you start mapping things out week by week, you’ll see where to expect a rise in expenses as well as figuring out periods when money is scarce.
Go through your invoice terms
If you’re having trouble with cash flow, check your payments terms to make sure that your cash flow is prioritised.
If your average invoice period is 30 days and the average time for you to receive a payment is 45 days, that’s 15 days that you have to float, which means you have to take money out from your current balance to run your business.
You’ll want to look at the terms you’re offering to clients and especially evaluate if they work for you and how your clients are responding to those terms.
In general, try your best to get money up front on your projects and deliver the products or services after an initial payment is received and use milestones to receive payments.
For example, if you’re working on a 3-month invoice worth $10,000, you might want to ask for an upfront payment of $2,500 with the rest of the invoice behind split among several milestones.
If you’re selling a service, think about offering some sort of subscription model where clients pay in advance for a year and they get a certain service every month.
You can consider offering a slight discount in exchange for them making a long term commitment to you and paying for invoices upfront.
Be firm on receiving payments
In order to speed up your received payments, you’ll need to have a good invoice collection system in place.
Here are some things to ask yourself:
- How long does it take for you to get paid?
- What is your process in collecting payments?
- Are you relaying enough info to your clients?
- Are you identifying and settling disputes fast enough?
Keep in mind that these are not only ways to improve how quickly you get paid, but your customer service as well.
Settling disputes may seem counterintuitive in receiving payments but it’s incredibly important, here’s why:
Put yourself into the shoes of your client; if you buy something and there is an issue with the invoice, would it annoy you if they take a long time to resolve the dispute?
Hence, you should deal with your client’s issues as gracefully as possible even if they’re a pain in the ass to work with. You don’t want to lose a client and an invoice along with it!
You should also be firm on your invoices. Make it clear to your clients that late payments are not tolerated and a penalty will be imposed if they fail to settle an invoice within X amount of days.
Here are some examples of asking for invoices in a polite manner:
Don’t be afraid of going to small claims courts if large invoices are not paid for a significant period of time. If you have a contract, that’s better as businesses are legally required to settle their invoices if they are not bankrupt.
Being realistic about your business
Sometimes you need to take a step back to see things clearly and running a business is no different. If you’re always struggling and your cash flow statement is poor, ask yourself why.
- Are your sales too low?
- Are your services poorly priced?
- Can you chase payments more quickly?
- Are you selling your products for too little?
- Could you be selling them for more?
Be level-headed about your venture and its future – if you’re not making a profit, you might need to rethink your business model.
You may be worried that sales will suffer if you raise your price too much. There is a chance of that happening but you never know until you’ve done proper market research or testing.
When you increase the price of your service, the perceived value of your service tends to rise as it is now seen as a high-quality service. Clients will also appreciate your services more as they are now investing a significant amount of money for your service.
If your pricing is too cheap, you won’t be taken seriously as your service will be seen as an inferior product. Of course, don’t go overboard and charge ridiculous prices for your services – you will lose some business to competitors if you do so.
It’s important to know that good margins come from good rates. It is your job to find a price point that helps boost your cash flow while not outpricing your client base.
Reduce your overhead
Negative cash flow is often found in assets or equipment with ongoing monthly payments, such as vehicles and business equipment. They can be very expensive if you don’t keep track of your expenses.
For starters, check whether you are getting the best deals on company insurance, phone bills, and applications. Reducing staff overtime and creating a more energy-efficient workplace by cutting down on power and water bills are also proven strategies to reduce costs.
Small overhead costs savings can add up significantly to increase your monthly cash flow, giving you more money to invest in the company for growth.
Make it a priority among your team
As improving cash flow is a priority for all businesses, make sure every single person in your team understands that. Remember that your employees will be motivated by the targets you set for them.
Even members such as your sales staff should be on board in improving cash flow. If a salesperson only has a revenue target, he or she will work to meet it regardless of whether the invoices are paid on time or in full.
Instead, you should shift that to only revenue from invoices that are paid. It sounds cruel but your staff will understand invoices that don’t get paid are close to useless.
You can also improve cash flow by educating your team members on your business’ payment terms. This will allow them to communicate your terms clearly for your clients.
Accept credit and debit cards
Credit card fees are inevitable but there are huge benefits to accepting credit and debit cards as a payment option.
The most important benefit is that you get the money quickly. You either get it on the spot or by the end of the day. Clients are also more likely to spend more money when they pay by credit card compared to when they pay by cash due to impulsive purchases.
Whether you serve clients face to face or online, a merchant services solution makes it easy to process payment cards. Providers like Stripe also allow you to track payments which make it easy for your analytics and accounts book.
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