Creative Business Cash Flow Solutions

Maintaining an adequate cash flow has become a significant problem for many business owners. Discover some ideas that can help

Customers are not spending and it’s a lot harder to get a loan these days. These factors have made cash flow management for a small business much more difficult than it has been in the past.

Here are some basic tips to improve small business cash flow that are both creative and flexible.

Increase Prices

One of the biggest mistakes small businesses make is charging too little for goods and services.

While it may seem counter-intuitive to raise prices during a recession, the truth is that perceived value can have a dramatic effect on business cash flow.

Prices set too low tend to attract customers who are slow to pay and who end up dickering for even lower prices, causing sore feeling on both sides.

By contrast, studies show that the more an item or service costs, the greater the perceived value of the goods or services and the greater the demand.

Small businesses offer a level of personal attention, craftsmanship, or expertise that the big guys can’t, and small business customers do expect to have to pay more for this.

The ultimate goal is not to offer the lowest price but rather to build the most loyal high-end customer base. Pricing should reflect the expectations of the best customers, not the worst.

Stop Charging by the Hour

Most service-oriented small businesses start out charging by the hour, a practice which instantly positions the business in competition over price instead of quality.

Charging an hourly rate brands the entrepreneur as a laborer instead of a specialist. If the hourly rate seems too high to the customer (even though it is in all likelihood much too low); the customer will argue or look elsewhere.

Simply shifting from an hourly rate to a per-job estimate and final price not only attracts a better class of clients, it also gives the small business owner more leverage and flexibility in negotiating price.

Coming in under estimate builds good will and good feelings, even when the final cost to the customer is substantially higher than it would be under an hourly rate system.

Look for Hidden Opportunities

Every recession creates a need and demand that wasn’t there before the recession started. The creative small business person who is the first to meet this need or demand with a useful service or product, will increase business cash flow exponentially.

One good example is that of a California lawn service provider who watched suburban foreclosures eat away at his client base until he noticed that many of the subdivisions he serviced were blighted by vacant properties with yellow, dead lawns. He devised a cheap, quick method of coloring the dead grass green by spraying it with a vegetable dye that lasts about six weeks, and approached a few realtors with this idea.

Word spread rapidly, and now, dying the lawns of foreclosed properties for realtors and banks is pretty much all he does. The temporary color is cheaper for the banks than lawn maintenance, and the green lawn color helps sell the homes much faster. His new service keeps cash flowing through his lawn business and has established him at the forefront of a new industry.

Use a Website for Flexible Payments

Many customers today greatly prefer the flexibility of internet payments and purchases to paper invoices. These kinds of customers, who often tend to be younger or upscale, will often only do business through the web.

While it’s true that building a website will likely require professional assistance and is not free, online credit card payments for goods and services are much faster and cheaper over the long term than monthly paper invoicing.

Websites that offer business related content (like articles or blogs) in addition to online payment options can also generate ad revenue by use of affiliate marketing of related (non-competing) services and products.

Review Expenditures

Good cash flow management means regularly reviewing your expenditures. Every four to six months, whether a recession is under way or not, it is important to review how much money is going out and whether it really needs to be going out.

Often a review of just an hour or two can free up significant cash without any major changes to your business.

Ask yourself the following questions:

  • Do you buy materials or supplies that could be purchased at a lower price?
  • Could some necessary items be purchased in bulk for additional savings?
  • Are there goods or services that can be dropped entirely?
  • Are automatic deductions in place for goods or services that could be paid in another way to maximize cash on hand?
  • Have insurance agents and accountants been consulted for price reductions or for cash flow strategies?
  • Are all receipts being saved and all possible tax deductions being taken?

Reward Your Best Customers

The customers who regularly pay on time or pay early will keep doing so if they are rewarded for it. A discount can be offered for immediate cash payments, a perk given for early payment, or a discount or perk for buying in bulk or for referrals to other customers.

The practice of rewarding customers who increase business cash flow can easily generate even more customers who further increase business cash flow.

Invoice Immediately

Many small businesses use software that generates an invoice to each separate customer every thirty days. You can improve your cash flow by invoicing upon completion or delivery of the product. If you find yourself having difficulties keeping up with this task, there are services and people out there that can help you. If you wish to have a successful company, improving your cash flow will only benefit you. Hiring an organized accountant or looking into companies who specialize in invoice factoring might be a something you want to consider.

Offering an incentive or reward for immediate cash payment can also increase business cash flow. Most customers understand that paying in cash comes with perks. Make sure such perks are being offered where appropriate.

Use Credit Wisely

Small businesses and entrepreneurs who have a business credit card or other open line of credit should use that line for purchases whenever possible, and pay off the bill in full when it comes due each month.

This practice provides 20 to 30 days of ‘free’ additional cash, which can make a big difference in creating good business cash flow when cash is tight.

Check Out Micro-lending

A micro-lender is a private person or group willing to lend money to small business persons who can’t get the money from a bank.

Micro-lenders have all kinds of motives, some philanthropic and some entrepreneurial, and they do earn interest. Finding the right match can benefit all parties and provide the cash flow cushion needed to help a small business ride out the recession.

Often the rates charged by a micro-lender are even better than what a bank would offer (if the banks were lending, which they often are not). Some popular micro-lending websites include Kiva, Prosper, and MicroPlace.


Maintaining good small business cash flow during a bad economy can be challenging, but it can also create an opportunity to meet new customers, expand and refine products and services, forge new relationships with micro-lenders and other businesses, and review practices and think outside the box.

With every crisis comes a certain amount of opportunity. Creativity and flexibility can keep the cash, and the opportunities, flowing even in the worst of times.

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