A consistent and stable cash flow is always important for any successful business. So if you’re wondering about how to more effectively manage your business’ finances, here are the 7 best tips to improve your small business cash flow.
Always Know What Your Loan Options Are
Almost all businesses will need loans sooner or later. So try to consult a lender network as soon as you can to see what sort of small business loans you have access to. Even a relatively modest loan can help you cover certain holes in your budget that will, in turn, allow you to purchase additional items, materials and stock to help you get through the peak seasons or during unexpected changes in demand.
Also, remember that small business loans will allow you to overcome such problems, and at the same time, will give you more than enough profits to cover the expenses that you’ve incurred due to the loan. Loans should only be avoided if they cannot guarantee a substantial return on investment. What this means is that loans are essential for expanding one’s business. They are also a reliable form of cash on hand, particularly if you have the sudden opportunity to increase your business cash flow.
Pay You Bills Only When They’re Due
Some of us have the tendency to pay our bills as quickly as possible. This way, we will no longer have to worry about them. However, paying your bills early reduces the amount of cash that you can use, and when an emergency strikes, you may regret having spent that money very early on. So whenever you need to pay your bills, pay them only when they’re due. This may seem a little too close for comfort, but thanks to electronic banking, you won’t actually need to spend a lot of time paying your bills and liabilities.
Use Incentives For Early Payments
A lot of clients, particularly old patrons, will gladly pay their order ahead of time. This is especially true if they get a large discount. Indeed, giving clients the chance to save a substantial amount of money on their purchase is a good marketing move.
Although you shouldn’t always offer huge discounts for early payments, offering any type of incentive for early payments can potentially help your liquidity on the long run. For example, you can try offering lines of credit for reliable clients and customers, or give them free products to go along with their purchase. If you do that then some of your clients will be more willing to pay early, and that is certainly good for your cash flow.
Work With Specialists
Aside from managing your business correctly, you should also consider working with professionals. Certified book keepers, marketing specialists and recruitment agencies can all help to improve your company’s cash flow in ways that you would normally not think about. For example, when you hire a certified book keeper, not only will you be able to avoid hiring a new employee, you will also be able to avoid spending money on personnel related costs. All you need to worry about is their fee. You won’t need to worry about monthly salaries, insurance policies or benefits.
Plan for Seasonal Changes
Consumer demand will often change along with the seasons. Holidays and vacation seasons will often mark peak seasons for many companies. Anticipating how consumer demand will change during these seasons will help you keep a lot of cash on hand. In this case, it’s really about supply and demand. For peak seasons, be prepared to invest more, while during lean seasons, be prepared to hold on to a lot more cash.
Get Accurate Bookkeeping
It may seem obvious, but one of the best ways to ensure consistent cash flow is to simply keep accurate records. In this, it’s best to work with someone – either an employee or freelancer – to work on your books and to track your existing cash on hand. This way, if you feel that you’re not getting enough cash flow each month, you’ll be able to address the source of the problem very quickly.
Clients usually prefer to pay their invoice thirty to sixty days after they’ve received their invoice, which basically means that – in general – most companies don’t get paid promptly. To address this problem, all you have to do is to monitor all invoices and pending payments to keep track of when they will be due. This way, you’ll be able to contact your customers if necessary. So if you want to get paid early, it’s important to send along your invoice promptly as well.
Photo Credit: Flickr/Ken Teegardin