6 ways to help address a cash flow crunch.

Apr 30 2020 | Alice Wong, PayPal Editorial Staff

It happens to nearly every business—large, small, or in-between: a cash flow issue. 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. It might be wise to first consider these six lesser-known strategies. 

1. Offer—and outsource—financing for customers.
It’s not just big-box retailers who can offer their customers financing. Now, you can too. That could result in larger average order sizes1 and higher checkout conversion rates.2 And you know what that could lead to: more cash in your pocket.
 
Often a convenient way to offer consumer financing is to go through a
third party. It may also be easier to let that third party handle the complexity of financing, servicing, and collection of the loan.
 
Here are four key questions you might want to ask potential providers of consumer financing:

  • How quickly do I get paid?
  • Are there any program management fees?
  • How many people currently work in their payment network?
  • Will customers get a competitive financing offer?

Since outsourcing consumer financing means the details of the program are out of your hands, go with a provider you trust to both pay you upfront and treat your customers well.

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, throw in 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 deposit your check.
 
There’s a faster way: digital (or electronic) invoicing. Not only do you save on postal costs, you also save time since you can send out invoices immediately. But the bigger reason to switch to digital is this: customers pay faster with online payment options. In fact, 84% of all PayPal invoice payments are made within 3 days of being received.3

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. Ask for relief.
To free up cash flow, check in with financial institutions where you bank or access credit to see if they’re offering any relief on payments, fees, or specific programs for businesses. For more information on government relief, we’ve put together this resource page.
 
6. 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.
 

If you do your payment processing with PayPal, the PayPal Business Debit Mastercard® gives you instant access to money in your account with PayPal even though there might be a hold on those funds.4 In addition, you get 1% cash back on eligible purchases,5  which means you get more money in the mix.

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.

PayPal Commerce Platform (PPCP) is a leading global payments platform for accepting & making payments, offering consumer financing, and helping you manage risk and grow your business.  PPCP enables your customers to instantly pay the way they want to pay in over 50+ markets.
  • Accept PayPal, PayPal Credit6, Venmo7, major credit cards, debit cards, and alternative payment methods in 50+ markets.
  • Offer consumer financing with PayPal Credit. You get paid in full upfront with no additional risk or fees.
  • Sell anywhere with checkout, card readers, Mobile POS, and Virtual Terminal. Internet access required.
  • Get instant access to funds via cash transfers and PayPal Business Debit Mastercard®.
  • Get advanced fraud detection, Seller Protection8, and Buyer Purchase Protection9
Call us at 844-720-4039 for more information.
 
1 Based on PayPal’s analysis of internal data of all PayPal and PayPal Credit active customers and volume from December 2017 – November 2018.
2 Online study commissioned by PayPal and conducted by Logica Research in November 2018 involving 2,000 U.S. consumers, half were PayPal Credit users and half were non-PayPal Credit users.
3 Based on PayPal’s analysis of internal data of all PayPal and PayPal Invoicing active customers and volume from December 2018 – November 2019.
4 A PayPal business, PayPal Cash or PayPal Cash Plus account is required to maintain and use a balance with PayPal. To be considered for a PayPal Business Debit Mastercard, a customer must either have a PayPal business account or be part of our Funds Now program.
5 Additional activation to receive this program’s cash back benefit is required. Please click to verify or complete activation of the cash back benefit. You’ll receive unlimited 1.0% cash back when your PayPal Business Debit Mastercard purchase is completed as a credit transaction by phone, online, or in stores. Transactions processed as cash withdrawals, cash advances, or those using a PIN or transactions that the merchant processes as PIN-less debit are not eligible for cash back. Additionally, you’ll only receive cash back when your monthly-earned cash back is at least $1.00. Cash back earned that’s less than $1.00 that month will not be awarded and will not carry over to the next month. See Cardholder Agreement for complete detail.
6 PayPal Credit is subject to consumer credit approval.
7 Account required to send and receive.
8 Seller Protection available on eligible purchases. Limits apply.
9 Buyer Purchase Protection available on eligible purchase. Limits apply.
 

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