As a business owner, being on top of your cash flow management helps lessen the chances of your business falling into debit and bankruptcy. An article featured on Preferred CFO suggests that poor cash flow management is the “reason 82% of small businesses fail”.
In theory, it is easy enough to bring in more money than your business is spending, but often in practice it’s not so simple. Having a positive cash flow in your small business involves much more than profitability. Regardless of if your company is currently profitable, many run the risk for negative cash flow because of a misuse of spending. For example, a company may run into financial constraints when they have future payment obligations that cannot be met due to mistiming incoming funds. But, maximizing your small businesses cash flow helps assist your business in increasing profits, meeting targets in a shorter time frame, and lowering operating costs.
But how can you achieve this? Here are the top 5 tips your business can follow to boost your businesses cash flow, quickly and easily!
Plan for future cash needs ahead of time
Keeping accurate records of accounting is vital. It is important that your business keeps timely and relevant records of current expenses which would allow you to forecast your future spending, based on the historical results. A business should be reviewing these records monthly for accurate results. By keeping tabs on you company’s spending, it allows you to foresee spending trends and help prepare your business for tough periods throughout the year, as well as seasonal spending too.
For instance, if your report anticipates a need for additional funds in the future, you may want to start talking to lenders about assisting your business and securing future financing. Similarly, if you can prepare ahead of time for major expenses, you’ll be able to schedule your other responsibilities, accordingly, avoiding cash flow surprises.
Improve your Accounts Receivable
You can remain on top of unpaid bills and shorten the time it takes to get paid by actively managing your accounts receivable. One approach to accomplish this is to encourage customers to pay on time.
For example, consider offering a small discount to clients who pay net 10 if your payment conditions are net 30. Subsequently, offering several payment alternatives, such as credit card payments, will make it as simple as feasible for a consumer to pay you. While these methods may incur processing fees, if cash flow is short, obtaining money quickly is beneficial for your organization and avoids time and energy spent on collection. These methods may assist you in avoiding the use of credit cards to finance bills.
Send Invoices Out Immediately
Improving your company’s cash flow will require establishing and structuring your accounts payable procedure. It is a smart idea to invest in accounting software if your accounting staff does not already use it to manage your accounts. Then, communicate with your team the most significant invoices so that they can be paid first. Keep in mind that outstanding invoices should not be overlooked.
Put idle cash to work
As the saying goes, if you don’t use it, you’ll lose it. Putting idle cash to work is another strategy to boost business cash flow. Your idle money is money that isn’t earning you any money. If you have substantial amounts in non-interest-bearing accounts, chances are you can find a better home for them. You might want to consider transferring them to an account that pays interest.
Pay Suppliers Less
Maintaining a friendly relationship and regularly communicating with supplies allows you to have a better chance of negotiating preferable terms with them. If suppliers are ready to give you a discount in exchange for early payments, do so! Mastering the art of bargaining is an important component of doing business, and it can help you persuade your suppliers to give you a better deal. A lower cost from suppliers, in turn helps instantly boost your cash flow.
There are countless reasons to seek business funding, and our goal at GroWise is simple, to get your business funded and growing… fast.