Strategies to handle your cash flow include issuing invoices to customers on time, unloading inventory that is not selling well, and carefully tracking where your money is going. To get a handle on cash flow, consider adopting new policies, such as offering discounts to customers who pay early, setting up a purchasing co-op with other businesses, and using electronic payments to pay bills. You may also want to negotiate better terms with vendors, refine billing procedures, and experiment with raising prices to improve cash flow.
Get creative with the new ways that your company generates revenue, which will, in turn, improve cash flow. Whether you choose to focus on increasing sales, decreasing expenses, building capital – or some combination of the three – you are on the road to increasing cash flow and running a more successful business.
Take time to assess your operations, payments, and marketing efforts to find out how you can boost revenue and generate more cash, all the while decreasing expenses. While implementing any or all of these steps can help boost your company’s cash flow, you also need to ensure that you are making good decisions regarding marketing, customer service, product or service development, and new customer acquisition.
It is also important to cut down on cash coming out of your business, if at all possible. This means that you need to manage your expenses just as carefully as you handle your sales. You may report a healthy amount of income on paper, but you cannot meet bills if you do not have the cash in hand.
If you are running on negative cash flow, you might find that you cannot pay employees and vendors, pay monthly rent, and have the money needed for myriad other day-to-day business expenses. Spending may keep you from having sufficient cash to invest for the future, leading to a disequilibrium in your income alongside the decline of your liquid assets. If you spend just this allocated amount of money, either on your debit card or in real cash, you may be forced to consume within your budget.
Once you get your cash flow under control, you will be able to pay bills on time, spend less time chasing customers to make payments, and be comfortable knowing that you have the cash in the bank to grow your business. If you know that account payables are going up and that you do not have cash in the bank to cover these increasingly large bills, then it is time to create a strategy for mitigating this issue before it brings down your business.
Instead of cutting down on how long customers pay you, you want to figure out ways to extend the timeframes for accounts payable while keeping the cash in the bank. Another key to increasing cash flow is getting customers to pay invoices on time. Customers, once they get an invoice, tend to pay it late, and this has been one of the biggest factors leading to cash flow problems in some companies.
If you are making payments electronically to vendors, your company may be waiting till the morning of your bill payment deadline. It is not unusual for businesses to wait until late in the month to bill customers at one time. Sending out an invoice does not automatically result in payment, and if your money problems are usually due to a lack of payments, the New Year might be the perfect time to introduce a new payment policy.
If you are not in a position to negotiate, or you need money even earlier than you can negotiate with a client, consider invoice finance, otherwise known as accounts receivable finance. You can search online for invoice factoring in Australia to learn more about the method and how your business can benefit from it.
Where you have vendors who supply goods or services on credit, utilise full payment terms. If you have to purchase, using credit or pay-as-you-go terms helps to increase your company’s cash flow.
You could even use cash-back business credit cards for payments (where a set amount of cash is returned to you once payment is successfully made), which would help with your monthly routine payments. You could also take advantage of business credit cards since some provide up to a 21-day grace period, which can go a long way toward increasing your cash flow. You could even set up a system of accepting credit cards or payments online, which will simplify your bill paying.
Flexible options for payments could include cheques, cash, and certainly online payments. Offering different payment options will allow the client to make the payments easily. If you are accepting just one or two forms of payment, like cash or debit or credit card payments, then maybe it is time to think about adding some additional options to meet your customers’ needs.
While the payment options might have a processing fee, getting the money out quicker is better for your business if your cash flow is tight and eliminates time & manpower spent collecting. Another option is investing money to grow your business, using it to reduce your debt and reduce your interest payments, investing in new technology, or paying off certain expenses upfront.
If you must cover business expenses, prioritise resources that will help you increase cash flow and grow the business (either in the long term or short). Improving cash flow for your business is the key to increasing your company’s revenues, gross profit, return on investment, and customer loyalty.
By using your time effectively, you will get more done, spend less money on salaries, and avoid paying too much overtime (which can make a big dent in the money of your company). Outsourcing is also a good option to reduce your overall expenses.
By managing account receivables aggressively, you can keep tabs on unpaid bills and reduce the amount of time you have to wait for payment. Some online platforms offer excellent features for invoicing, which can help speed up your current invoicing process and improve cash flow.