8 Ways to Improve Cash Flow For Your Small Business

business owner using Jobber app to improve cash flow

Cash is king. As a small business owner, you know that better than most—it’s what keeps your business running and helps it grow.

But sometimes your cash flow feels more like a trickle. Clients aren’t paying, expenses keep popping up, and busy seasons don’t last forever. And your lack of funds is stressing you out.

We have the answers. Learn what cash flow is, then follow our tried-and-true tips for managing your business’s cash flow, taking your invoicing to the next level, and getting paid faster.

What is cash flow?

Cash flow is the money moving into and out of your business. Funds go into your bank account as income and leave as expenses. You can have positive or negative cash flow in any given month.

Positive cash flow means you have enough money to handle your expenses and still have something extra left over to add to your reserve funds. Nice!

If you have negative cash flow, you’re spending more money than you’re bringing in. You can’t pay for the things you need unless you dip into your reserve funds, and that’s not ideal.

Most businesses experience negative cash flow at some point, especially if they’re seasonal businesses—but you don’t have to. Try these tips to help improve cash flow.

1. Review financials regularly

Every week, add up your income and expenses so you can track your cash flow. Review those same numbers each month in your cash flow statement.

Then use a cash flow budget (AKA cash flow forecast) to predict next month’s flow. This should include invoices that are due that month, as well as planned purchases or expenses.

This will help you predict when cash will enter or leave your bank account, give you a better sense of timing, and help ensure you have enough money to cover expenses in leaner months.

READ MORE: Learn how to manage accounts receivable

Go over your profit and loss statement and balance sheet to calculate cash flow, too. You don’t need to do this every month, but the data really helps you identify positive and negative trends.

If you know you’ll need more money soon, you can start looking into ways to make that happen right away—no more waiting till your account balance reaches zero!

2. Upgrade your invoicing process

How difficult is your invoicing process? If the answer is anything besides “not at all,” there’s room to improve. Try these tips to upgrade your invoicing and improve cash flow:

  • Invoice immediately. The faster you invoice a client, the faster you get paid. Send your invoice right after finishing a job (or getting quote sign-off, if you need a deposit). With invoicing software, you can mark a visit complete and send the invoice right away.
  • Use an invoice template. Using a template helps you write an invoice consistently and more quickly than in a spreadsheet or Word document. We made a free invoice template for you, including adjustable wording to match your payment terms.
  • Set clear payment terms. Your payment terms describe when payment is due, what happens if the client doesn’t pay on time, and anything else they need to know. These terms work best when they’re short, clear, polite, and easy to understand.
  • Offer early payment discounts. If some clients pay before their invoice is due, think about giving them a small discount (like 2%) for paying early. Make sure to talk about this incentive in your payment terms so clients know it exists!
  • Charge late payment fees. On the other hand, if some clients pay late, charge a late payment fee. Have a due date on every invoice and add your late policy to your payment terms. This will help you get paid faster—or at least get a little extra for your trouble.
  • Send invoice reminders. Track your invoice statuses so you know which clients haven’t paid, then send them invoice reminders. You can use our overdue payment letters as templates so you don’t have to worry about wording.
  • Send unpaid invoices to collections. Talk to an invoice factoring company about buying old unpaid invoices at a reduced rate. You’ll get paid at least part of the invoice, which will help your cash flow much more than if you never got paid at all.

READ MORE: How to collect accounts receivable

Upgrade your invoicing with Jobber

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3. Reduce your expenses

There’s always a cost of doing business, but you can cut down on that cost with some careful planning. Go over your operating expenses and look for any opportunities to lower them.

Here are a few ideas:

  • Downsize your workspace or move to a different building. You can also share space (and expenses!) with another business to cut down on costs.
  • Review your service contracts (like your phone, Internet, and software) to see if you can get better rates anywhere. Sometimes costs are lower if you pay for the year up front.
  • Go over your inventory and equipment use, then sell anything you aren’t using. This will free up storage space and cash.
  • Inspect your equipment and see if you’re dealing with any inefficiency problems. By solving them, you can finish jobs faster and bring in more money long-term.
  • Need to replace equipment? Instead of buying, try leasing it to reduce up-front costs.
  • Look for cheaper alternatives to some of the products you’re using. Just make sure this won’t affect the quality of your work!
  • Some suppliers give rate discounts when you buy products in large quantities. If you don’t need it all or don’t have the space to store it, team up with other businesses who need supplies—and enjoy the savings together.
  • Ask suppliers for longer payment timelines or discounts for early payment. You can also consider switching vendors to find better prices or contract terms.

All that said, don’t cut essential corners to save money. Some expenses are still important and will help keep your business healthy!

Pro Tip: Depending on your industry, you can reduce up-front expenses for large projects by taking job deposits from the client. You don’t start work until they pay the deposit, so you aren’t dipping into your own funds.

READ MORE: How to handle incorrect payments from clients

4. Increase your revenue

One surefire way to improve cash flow is to actually get more cash. These tips can help you bring in more business and increase revenue and profit:

  • Expand and upsell. Offer new and complementary services, like gutter cleaning along with a window washing. If you’re at a client’s home and spot a task that would pair with the work you’re doing, upsell it to the client. This will increase your pay for that job.
  • Reconnect with past clients. It’s easier to bring back a past customer than to reach a new one. Reach out to clients you’ve worked with in the past and see if they would be interested in your services now—increasing revenue from existing clients can be a lot easier and cost efficient.
  • Start a subscription program. Some industries offer regular service, like cleaning, lawn care and landscaping, and HVAC maintenance. A subscription program (or even a loyalty program) attracts repeat customers and creates a predictable source of revenue.
  • Plan for seasonality. For many businesses, demand rises and falls throughout the year. Rearrange schedules, adjust your staffing, reduce costs, and expand into other work during your off seasons—for example, moving from lawn care into snow removal.
  • Build strategic partnerships. Partner with other home service businesses and send clients to each other. For example, if you’re a house cleaner and you notice a toilet isn’t working, you can refer a plumbing partner for service. They can do the same for you.

Pro Tip: Make sure to advertise these new services—and market your business as a whole—so the message is getting out there.

To get more business, you might feel like you have to discount your services. The problem is, the discount comes out of your profit margin, so you’re actually reducing cash flow. It’s best to avoid this tactic.

READ MORE: Use these strategies to increase your revenue with new customers

5. Raise your service prices

Review your rates and markup percentages to make sure you aren’t short-changing yourself. Factor in competitor rates, overhead and material costs, and your experience level.

You might be hesitant to raise your prices—will customers say your price is too high? What if they don’t want to work with you anymore?

READ MORE: How to price home services for your small business

But price isn’t the only thing a customer cares about when they hire you. They also consider your reputation and experience, the service you provide, and the quality of work you do.

Emphasize those reasons to customers so you can raise your prices without causing sticker shock. Your business needs a healthy profit margin to thrive—don’t be afraid to make that happen!

Could your margins be better?

Try our free 3-in-1 profit margin calculator and find out.

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6. Get funding from the bank

Need cash flow for something specific, like buying equipment? Talk to the bank about taking out a small business loan, line of credit, or business credit card.

Low- or no-interest loans and credit can help your business in the short term without creating too much extra debt, especially if you can get rewards or cash back on expenses.

Just be smart about it so you don’t fall into debt while trying to improve cash flow!

READ MORE: Dealing with chargebacks for home services

7. Evaluate your clients

If you’re paying for job supplies in advance, your cash flow will depend on whether your clients pay invoices on time or late. That’s why it’s so important to pick your client list carefully.

Monitor each client’s invoicing history over time and look for payment patterns. If they’re always paying late or not at all, think about firing them to make room for clients who will pay you for your hard work.

READ MORE: What to do when a customer won’t pay an invoice

You can also check a new client’s credit score before committing to a job. This shows you if the working relationship will be rewarding, or if it’s more likely to cost you.

Pro Tip: Evaluate employees, too—make sure everyone is focusing on the work they’re best (and most profitable) at. For example, if you’re spending too much time on your books or admin work, think about hiring a bookkeeper or accountant or a virtual assistant.

8. Offer clients more payment options

Clients will be more likely to pay their invoices faster if they have a convenient way to do it. When you’re collecting payment, try these alternatives to cash or checks:

  • Take payment in the field. If your client’s at home while you’re on the job, get a card reader and start accepting credit and debit payments in person. This will make payment more convenient for clients—and make it easier for you and your team to accept tips!
  • Accept payment online. Online payment makes it fast and convenient for clients to pay their invoices. When you send invoices by text or email, include a clickable link that takes clients to your client hub, where they can pay online when it’s convenient for them.
  • Store client credit card information. Set up automatic payments for recurring work by vaulting client credit cards. Just ask for their card data once, then store it securely and charge the card on file when the work is done or as a deposit, prepayment, or retainer.
  • Offer consumer financing. Some clients can’t pay for big projects up front—especially if your work is addressing an unexpected emergency. Offer consumer financing through Jobber’s partner Wisetack so you get the job without breaking the client’s budget.

Pro Tip: Need to get those payments faster? Jobber also gives you access to instant payouts, which shortens the time it takes for invoice payments to land in your bank account—from days to just seconds.

READ MORE: How to offer financing to customers

Cash flow is one of the many challenges of entrepreneurship, for businesses both small and large—and it’s one you’ll be facing every month for the rest of your career.

But now that you know how to increase cash flow for your home service business, you can tackle that challenge head-on, get paid faster, and keep your cash flow positive.

Take control of your cash flow

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Originally published July 2017. Last updated on December 2, 2021.

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