With the uncertainty surrounding COVID-19, many business owners may feel like they’re stuck in a waiting game. But there are things you can do right now to help your business’s cashflow, like delaying big expenses and prioritising your spending on more immediate needs to get you by, day to day.
Here are a few more ways you can help your business maintain much needed cashflow:
Use digital invoicing.
A digital invoicing solution saves you money on postal costs and allows you to send invoices immediately, so you can bill your customer as soon as you finish the job. More importantly, digital invoicing can help customers pay faster with online payment options. 1
Set payment terms that encourage early payments.
Requiring payment within 30 days may be the most common invoice payment term, but that doesn’t mean it’s your only option. For example, offering a 2% discount for early payment within 10 days (2/10 Net 30) gives your customers an opportunity to save money and may increase your cash flow. While 2% may be a commonly used discount, you have flexibility to make your own terms. If a 2% discount feels steep, you can lower it to 1%. If you’re really trying to incentivise a customer to pay early, you may want to consider raising it to 3%.
Work with your lender to see if you can get a better rate or payment holiday.
Review the terms of any business loans you’re making payments on to see what kind of interest rates you’re paying. Because of the current climate, the Reserve Bank has dropped interest rates to 0.25% and many banks are working with businesses to defer high interest payments. Call your lender to find out what relief services may be available to you.
Switch to a line of credit with a lower APR.
Many credit cards offer low introductory rates for new card holders. If you’ve been using the same business credit card for more than a year, you’re likely paying a comparatively high interest rate. Depending on your current balance, you may want to consider choosing a new card that also offers free balance transfers for a limited time. Just make sure you know when any introductory offer expires, because that’s when you’ll start paying higher interest rates.
Redeem your rewards.
If you’ve been using a credit card that gives you cash back or rewards you with miles, this might be a good time to redeem. You can use cashback rewards to pay down part of your balance or choose to receive the cash so you can put it towards other expenses. Redeeming miles or points may vary between credit card companies, so review the terms of your card to make sure you get the maximum value.
Offer gift cards to customers.
If you’re in a position where little or no cashflow is coming in, consider giving customers an opportunity to “invest” in your business. For example, many restaurants are offering their customers gift cards. This means that a customer will buy a gift card now for $50 that they can redeem at a later date for $75 when they visit the restaurant. Gift cards are a great way for loyal customers to support businesses that are struggling to stay afloat, but you need to make sure that you’ll be able to honor all these gift cards in the future.
These are just a few things you can do right now to help give you better control of your cashflow. Keep checking back for additional resources dedicated to helping small business owners navigate the current climate.
The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.
1 Based on PayPal’s analysis of internal data of all PayPal and PayPal Invoicing active customers and volume from December 2018 – November 2019.