5 ways to help address a cash flow crunch

Aug 05 2022 | Alice Wong, PayPal Editorial Staff

What is cash flow crunch? It happens to nearly every business – large, small, or in-between: a lack of funds leading to a cash flow issue. But how to avoid cash flow crunch affecting your business – that’s the real question.

You can raise prices on what you sell. Or ask suppliers for some payment slack. Those tactics might help. But you might also risk losing customers or damage your relationships with suppliers. Find out how to improve cash flow crunch with these six lesser-known strategies.

1. Offer buy now, pay later options for customers.

It’s not just big-box retailers who can offer their customers financing. With pay later options, you can too. Pay later options allow your customers more flexibility in how they shop, while you get paid upfront.

For example, PayPal Pay in 41 is a short-term solution that lets your customers break up the cost of a smaller purchase into four payments. For bigger purchases, customers can use Pay Monthly2 as a longer-term payment solution to spread the cost further over 6, 12 or 24 months. Offering this flexibility can help lead to boosted sales and increased order size.

2. Get more of your customers over the checkout hump.

You can help make a difference in your checkout completion rate with a few simple tweaks:

  • Present shoppers with their preferred payment options.
  • Reduce steps at checkout, especially in the number of form fields.
  • Display security icons next to your Buy Now button.

Of course, you’ll still have customers who abandon their carts, so be sure to send them a reminder email. If it makes sense, add an incentive.

3. Switch to digital invoicing.

Even in this digital age, businesses still use paper-based invoicing to bill their clients or customers. But you know how snail mail is. Weeks or months can pass between the time you send your invoice and the time you see the funds in your account. There’s a faster way: digital (or electronic) invoicing. Not only do you save on postal costs, you’ll also save time since you can send out invoices immediately.

4. Change invoicing payment terms to speed up payment.

While Net 30 is the most common invoice payment term, it’s not etched in stone. The 2/10 Net 30 might increase your cash flow. A 2/10 Net 30 payment term gives your customers a choice. It tells them that even though the invoice is due in 30 days, they’ll get a 2% early payment discount if they pay it in ten days. If a 2% discount feels steep, you can always start with a 1% discount.

5. Find out how to access your funds more quickly.

Your bank may place a hold or reserve on your funds. That means your money is temporarily unavailable to you. This usually happens with new accounts, large or out-of-state checks, and big deposits. Banks do this to make sure funds arrive before they’re available in your account.

In the past, there wasn’t much you could do about this. But today, banks are coming up with programs to help you get to your money faster. Ask your bank or payment processor.

While cash flow crunches are a part of life for most small businesses, there are smart steps you can take to help alleviate them. Look at every possible short-term strategy so you can bridge the gap between the ebb and flow of your cash cycle. Maybe you can’t eliminate crunches – but you can find ways to manage them better.

Get the all-in-one solution: PayPal Commerce Platform.

Learn more about the PayPal Commerce Platform (PPCP) for accepting and making payments, offering consumer financing, and helping you manage risk and grow your business.

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. About Pay in 4: Loans to California residents are made or arranged pursuant to a California Financing Law License. PayPal, Inc. is a Georgia Installment Lender Licensee, NMLS #910457. Rhode Island Small Loan Lender Licensee.

2. Pay Monthly is subject to consumer credit approval. 9.99-29.99% APR based on the customer’s creditworthiness. PayPal, Inc.: RI Loan Broker Licensee. The lender for Pay Monthly is WebBank.

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