Yes. Achieving a truly stable cash flow is easier said than done, especially for a small business. And there are several well-known strategies that can significantly improve the predictability of cash flow. However, what if I said there is a cash flow tool that provides you a score that keeps you aware of your cash flow stability? Introducing the Tor Score.
Below are eight strategies to help a small business stabilize its cash flow. However, rolled into one, these eight strategies balance small business revenues with expenses. The Tor Score provides small businesses a score from 1 to 100 on its effectiveness of balancing income with expenses. One tool, one score, a minute or two each day and the business owner can be alerted to the business’s health.
Strategy #1: Invoice Promptly and Clearly
Easy Action: Send invoices as soon as the product is delivered, or the service is rendered. For retail businesses this is how they work anyway!
Why it helps: Faster invoicing means faster potential payment. Ensure your invoices are clear, detailed, and include payment terms (e.g. net 15, net 30).
Strategy #2: Offer Multiple Payment Options
Easy Action: Make it as easy as possible for customers to pay you. Accept credit cards, online transfers, and other popular methods, if you are willing to incur payment fees.
Why it helps: Removing payment barriers can reduce delays and increase the likelihood of timely payments.
Strategy #3: Set Clear Payment Terms and Enforce Them
Easy Action: Clearly state your payment terms upfront in your contracts and on your invoices. Don’t be afraid to follow up politely but firmly on overdue payments.
Why it helps: Establishes expectations and encourages customers to pay within the agreed timeframe.
Strategy #4: Offer Incentives for Early Payment (Optional)
Easy Action: Consider offering a small discount (e.g. 1-2%) for customers who pay their invoices early.
Why it helps: Can encourage faster payments and improve your immediate cash flow.
Strategy #5: Build Recurring Revenue Streams
Easy Action: If applicable to your business, explore offering subscription services, maintenance contracts, or other models that generate predictable, recurring income.
Why it helps: Provides a more stable and predictable base for your cash flow.
Strategy #6: Manage Your Expenses Carefully
Easy Action: Track all your expenses. Identify areas where you can cut unnecessary costs or negotiate better terms with suppliers.
Why it helps: Reducing outflows makes your existing inflows more impactful on your overall cash flow. This is critical.
Strategy #7: Forecast Your Cash Flow Regularly
Easy Action: Even a simple spreadsheet projecting your expected income and expenses for the next few weeks or months can help you anticipate potential shortfalls.
Why it helps: Allows you to proactively address potential cash flow issues before they become critical.
Strategy #8: Diversify Your Customer Base
Easy Action: Avoid relying too heavily on one or two major clients. Spread your business across a wider range of customers.
Why it helps: Reduces the risk of a significant cash flow disruption if a major client delays payment or leaves.
The “easiest” way often involves a combination of these strategies implemented consistently. Start with the simplest ones that fit your business model and gradually incorporate more as you grow. The key is to be proactive, organized, and disciplined in managing your income and expenses. And in our view start with the Tor Score!
