50 Ways Small Businesses Can Increase Cash Flow

Cash doesn’t always flow how you need it to. From customers who pay late to suppliers who have suffered some kind of setback and can’t get you what you need, sometimes cash stalls.

Having little or no cash flow is detrimental to a small business. If employee pay is delayed, they might jump ship and if you miss a loan payment, your credit will take a hit and you might find yourself facing higher interest rates. Having good cash flow will also allow you to have more money for day-to-day operations and innovation.

We’ve compiled this list of 50 ways to use your receivables to increase your cash flow and make sure you avoid cash stalls.


  1. 1. Selling
  2. 2. Purchasing
  1. 3. Loans / Credit / Financing
  2. 4. Business Adjustments


1. Offer discounts to customers who pay early

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This one may seem a little counterintuitive, because offering discounts means taking a hit to your bottom line, but we’re not talking a huge discount here. Even a discount as little as 2% will incentivize people to pay early because if they consistently pay early, the money saved over time will add up for them.

2. Increase your prices

Obviously you have to be careful with pricing. Setting them too high will alienate customers and may lead to even more cash flow problems. However, it is a good idea to experiment with pricing. You might just be leaving money on the table if you set your prices too low.

3. Sell your old inventory

Even if you have to sell it for a huge discount, it’s better to get rid of old inventory and make some money from it than just having it sit around collecting dust. It frees up space and gives you extra money to work with.

4. Ask for deposits

Not everything is fit for a deposit, but for products and services where it makes sense to ask for a deposit, go ahead and ask for one. Cash flow will see a significant boost if you regularly get into the habit of asking for deposits or down payments. Getting cash upfront for projects means the client will be paying for it to be done rather than you having to fund it and collect later.

5. Send out your invoices immediately

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This will help plant the seed in your customers’ minds that they should pay as soon as they possibly can. Use an electronic accounting system to expedite and automate the process as much as possible. Don’t be afraid to use strong language with customers who are past due, but keep it appropriate, obviously.

6. Scrutinize your customers’ payment history

If a customer regularly takes too long to fully pay an invoice, you can offer them a small discount for paying in full. If they do not want to do that, you can try playing a bit of hardball and tell them you cannot offer them credit anymore.

7. Track your accounts receivables and approach slow payers

If a customer is consistently a slow payer or causes you to lose money (and even big, seemingly lucrative accounts can be money losers) consider approaching them about the issue. They might have a legitimate reason for paying slow and they will likely be amenable to working something out with you. If not, you can always drop them as a customer.

8. Perform credit checks on potential new customers if they’re not paying cash

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This is an obvious one, but if it’s not something you’re doing already, you should start so you can avoid problems in the future.

9. Enforce late-payment discipline

You’ll need an effective collections system in place to ensure timely payment and you’ll need to have fair penalties in place for late payers. It’s not enough to just have those penalties in place, though. You have to enforce them when it’s appropriate.

10. Organize your billing schedule

With automated accounting software, you can easily keep track of when accounts get past due and by how much. You can flag these overdue accounts and act accordingly.

11. Switch appropriate clients from project-based to retainer-based accounts

If you provide a service where you get paid per project, see if any of your customers would be interested in paying you a monthly retainer to supply them with a certain amount of services. You can try to entice them to switch to this retainer model by giving them incentives like discounts or value-added services.

12. Tighten control of your inventory

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Having too much inventory can be just as bad as having too little. Calculate your inventory turnover ratio by dividing the cost of goods sold by the average value of your inventory and avoid purchasing more inventory than you need. Suppliers may try to get you buy more with big discounts, but the discount will be moot if you can’t move the inventory.

13. Encourage the use of payment cards rather than checks

How you accept payment will depend a lot on the nature of your business, but if it’s something you can readily accept debit and credit card payments for, try to get customers to use these methods over checks. Not only will you receive the money quicker, it cuts down on the handling of checks.

14. Encourage “continuity” sales

Offer deals to people who commit to purchasing your products or services over a fixed period of time. Magazine subscriptions are the best example of continuity sales. You pay the publisher for a one-year subscription and you get a discount compared to if you were to buy the issues individually. Try to come up with ways to offer continuity sales on whatever you offer. Your customers get a discount while you get the cash upfront.

15. Set up your terms of service so payment in full upon completion is part of them

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For those who offer services for projects, letting clients know upfront that you require payment in full when you complete the required services, not a month or two afterwards. If they agree to your terms, they are obligated to follow through with paying you in full when you’re done the work.

16. Stagger payments on long contracts

If paying a deposit or paying in full is not doable for clients, try staggering payment, accepting a percentage on the agreed upon amount when certain benchmarks are hit. Using a construction firm as an example, you can arrange for 15% of the total to be paid when engineering is completed, 35% of the total when supplies are delivered to the site, 50% when you hit an agreed upon benchmark, 75% when you hit another agreed upon benchmark and the remaining 25% upon final inspection and acceptance.

17. Use change orders where applicable

If you are selling a service that is clearly defined in a contract between you and your client, be cognizant of them asking for additional service that falls outside that scope. If they do, you may be able to issue a change order to collect on ancillary work you’ve been asked to do.

18. Establish a layaway program

If you sell big-ticket items or your products just cost more than people generally spend in at one time, try establishing a layaway program where people can pay for a product in installments and they receive the product when they are done paying for it. This will give you access to the cash they pay you regularly. Note that special accounting practices need to be followed for layaway programs.


19. Establish good relationships with suppliers

It pays to establish good relationships with all stakeholders regardless of cash flow, of course, but if you have a solid rapport with suppliers, they are more likely to negotiate with you on payment and payment date changes.

20. Stretch out your payables

Although you don’t want your company to be flagged by your suppliers as one that always pays late, find out the maximum amount of time they can let your accounts payables slide and use it to your advantage.

21. Ask for early payment incentives

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In direct contrast to the last entry, take advantage of any early pay incentives your suppliers have if you can. If they don’t have any such incentives, ask if you can set one up.

22. Avoid shopping in a single place

You may be able to save some money by splitting up where you do your purchasing. Some equipment, like computer hardware, may need to come from a more expensive place because you get value added service like assistance choosing the right equipment for you. Other equipment, like printer cartridges, cables and non-specialized software, you may be able to buy from somewhere else for cheaper.

23. Form a buying cooperative

You can form a group of business people who all need the same supplies and make bulk purchases and then divvy up the supplies between yourselves.

24. Consider leasing instead of buying

Leasing equipment rather than buying it has its downsides, of course, but it can also have a positive impact on cash flow. Outright purchasing equipment when a company is expanding can tie up cash or lines of credit that can be better used for day-to-day operations. As lease payments are considered a business expense, you still get the tax benefits of buying equipment despite not actually buying it.

25. Use your business credit card

Consider using your business credit card to pay suppliers and make business purchases. Know the card’s grace period well and take advantage of it when necessary. You might have as many as three weeks to pay your bill after receiving your statement that you can take advantage of if necessary. Some cards also have cash-back features, so you may be able to take advantage of those, as well.

26. Consider using financing for purchases

Even if you have enough cash to make a purchase outright, consider opting for financing instead. You’ll end up paying more, obviously, but it might be worth it to be able to keep your cash for daily operations rather than not having it there anymore for when you potentially need it.

27. Buy used equipment instead of new

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Often, used equipment that is still in good working condition can save you up to 80% off the price of a new piece of equipment. Foreclosure auctions are an especially good place to find machinery and other equipment still in good enough condition to be worth purchasing.

28. Use cash for bigger discounts when and where applicable

Sometimes your suppliers will reward you if you pay in cash by giving you a discount. You’ll have to decide whether paying with cash, thus depleting your own, is worth the discount they’re offering. If it is, take it.


29. Consider factoring

Factoring is when you sell your accounts receivable to a factoring company for a slight discount and then let them take care of the collection of that invoice. A short example using round numbers: You sell an invoice worth $5,000 for something that has already been shipped or completed and the factoring company gives you $4,500 immediately. They then collect the $5,000 owed on the invoice, forward you $400 and keep the remaining $100 as a fee. Not only do you get money immediately, the factoring company does the collecting.

30. Asset based loans

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You may be able to secure a line of credit with your accounts receivable, your inventory or the equipment you own. In a nutshell, you complete a Borrowing Base Certificate on a monthly basis that shows the value of all your assets. You are then permitted to borrow up to 80 or 90% of your outstanding accounts receivable and maybe more against your inventory and equipment.

31. Equipment loans

You can procure loans specifically for equipment or you can get a term loan secured by the equipment you already own. This is a viable option for companies that cannot get a loan from a bank or that may have less than stellar credit.

32. Cash Advance Assignment Loan

This can refer to either a Merchant Cash Advance, which is paid back by the lender taking a percentage of your company’s credit card sales or a term loan that is paid back through either daily or weekly ACH debits from your checking account. You’ll want to pay particularly close attention to the various rates and fees of the lender if you decide to go this way.

33. Establish a line of credit

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Lines of credit are much more convenient for businesses than trying to get quick, short-term loans. You can shop around to get the best rate and once you’ve found the one you’re happy with, you can use your line of credit to cover emergency purchases and to give you smoother cash flow. When you don’t need it, just keep it paid off.

34. Get a high interest savings account

When you’re short on cash, the last thing on your mind is probably a savings account, but it’ll be worth it in the long run to set one up for when you do get smoother cash flow established. Your money in the bank might as well be working for you, right?

35. Renegotiate fixed debt

See if you’re eligible for a lower interest rate or a longer term on the debt you have.

Business Adjustments

36. Use cash flow projections

Get yourself some good cash flow management software and keep track of it on a week-to-week basis. This will minimize surprises and give you a clearer picture of what to expect in an average week and help you prepare for changes in receivables.

37. Segment your suppliers, customers and receivables

Approaching receivables as a whole should be avoided because there are many moving parts to them. For inventory, you may have too much cash tied up in products that only sell sporadically. That cash might be put to better use if it was put toward your regular selling items. Suppliers can be split into one-off buys versus regular suppliers and segment your customers into key customers and lesser customers.

38. Make cash flow a company wide priority

Make sure all your employees know that cash flow is a priority. Employees are driven by targets and that includes your sales people. If you give salespeople a revenue goal, they will do what they can to meet it regardless of whether the invoices for what they’re selling get paid or not. Have a policy where anything that is written off comes out of commissions and sales people will be more mindful of the customers they deal with to reach their goals. Management teams should be focused on meeting capital objectives.

39. Shop around for the best insurance policy and service rates

Review your insurance policy on an annual basis and renegotiate it. Get quotes from at least three places so you can compare and if your current provider isn’t giving you the best deal, switch providers. Do the same with your other service providers like long-distance phone and internet.

40. Work with an accountant

Hiring an accountant may initially seem like an expense, but you should think of it more as an investment. They can analyze your cash flow and suggest adjustments that you may have overlooked and help you anticipate potential cash flow problems.

41. Invest in your business

Improving your marketing and improving your employees through training will pay off by making your business better, which will help you with cash flow.

42. Minimize the amount you draw from your business for personal use

Of course you should get paid from the business you run, but if cash flow is tight, look for ways to keep the amount you’re drawing for personal use down.

43. Hire a collections agency to go after delinquent accounts

Just because an account is way past due doesn’t mean you should give up trying to collect your money. However, it may not be worth the effort and time of your staff to do it. Collection agencies are used to chasing down customers who won’t pay, so you might benefit from their expertise. Some collection agencies will pursue payment at their own expense and just take a fee once they’ve successfully collected while others will purchase the debt from you. You obviously won’t get the full payment from the delinquent account, but getting something is better than getting nothing.

44. Have a bi-monthly pay cycle rather than a bi-weekly pay cycle

Having your pay program on a bi-monthly cycle only requires 24 pay cycles rather than 26 pay cycles like if it were on a bi-weekly cycle. Fewer cycles means you save money on the administrative costs of collecting, verifying and tabulating payroll information. Save further by utilizing direct deposit for payment rather than checks.

45. Repair old equipment rather than replacing it (when possible)

Modern equipment like vehicles and heavy duty machinery will usually last a long time if it’s properly cared for. Establish a regular maintenance schedule for equipment, use reconditioned replacement parts and parts from a third-party vendor rather than original manufactured parts. Set up a contract with a local repair facility for maintenance and repairs that cannot be done in-house.

46. Be wary of new technology

Every time a new product comes out — particularly electronic gadgets — the advertising boasts a whole bunch of new features to get people excited, including business owners. Before you rush out to upgrade all your equipment to the latest version, though, really assess whether or not you need the newest, flashiest version. If the features would legitimately improve your business processes, then it may save you money in the long-term to upgrade. However, if they will not improve processes, then just ignore the hype and keep your current equipment.

47. Delay equipment upgrades

Sometimes new versions of software or hardware come out several times per year and you’ll always be encouraged to upgrade to the latest version. But, the changes between versions are often miniscule and you might not use them anyway. Resist the constant calls to upgrade unless the upgrade is free. It might be worth upgrading, though, if the newer version has more robust security features.

48. See if you can barter products for goods and services

Sometimes a supplier might also be a customer. In those cases, see if you can negotiate a barter between your two companies where each company receives a portion (or all) of their final payment in finished products. Check with your accountant about the requirements of using barter in your tax reporting.

Here are just a few Barter Exchanges Companies you can check out: ITEX.com, NCBarter.com, SuperBizNow.com, U-Exchange.com

49. Reduce staff overtime

Find ways to improve your processes so you can cut down on staff overtime.

50. Make your business more environmentally friendly

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A long-term solution, you might be able to save on your water bill by using water saving plumbing fixtures. By installing a solar array, maybe you’ll be able to cut down on your energy bills and even sell power back to the grid. Keep in mind, though, that these are more like investments because they’ll cost more upfront and save you money down the road.

By using a combination of these tactics, most small businesses should be able to increase their cash flow and keep customers, clients, employees and suppliers happy.