At some point or another, every business owner needs to work on improving cash flow. The reason is simple: without proper management of cash, business operations can’t continue without problems.
Here we’ll share tips for improving cash flow that every professional business owner must know:
Pro Tip: Get cash from customers as soon as it’s viable.
First of all, prepare correct invoices – making mistakes will only delay payment as customers are likely to question them. Also, send your invoices on time because the longer you wait, the later your payment will arrive. Keep in mind, if you just can’t wait for customers to pay, you can always take out an invoice financing loan against the value of your outstanding invoices.
In addition, you may consider asking customers for a deposit up front, rather than relying on 100% payment later. This may be more appropriate for some types of businesses than others, but this is normal for a large order of any kind. And, be especially wary of new customers placing large orders, especially if you can’t verify their past payment histories and/or business reputations.
Pro Tip: Improve cash flow by paying bills as late as possible.
There’s no reason to pay the next day if you can wait a month. Of course, this is only true if there are no penalties for paying later or when you don’t get extra discounts for paying early. One way to optimize your cash flow is to pay bills on the day they’re due. Another business-savvy move is to use a business credit card where the payment is charged several days later.
Pro Tip: Avoid unnecessary fees and charges.
On the contrary, if paying late incurs charges (or forfeits discounts) then it would behoove you to pay on time. Further, credit card rates are notoriously high, so make paying off thee balances your highest priority. Take advantage of the grace period while you can, but you’ll save money by paying your balances off early.
Consider if long-term financing makes more sense for your business needs; it’s often far cheaper than revolving credit in the long run. Plus, when it comes to business telephone, internet, and other utility services you owe it to your business to shop around for the best plan. Even small savings add over time, ensuring a strong cash flow for years to come.
Pro Tip: Optimize purchases and sales = Optimize cash flow
If you have to buy something, why not buy it at a discount? One of the ways to do this is to evaluate discounts for making bulk purchases or advance payments. What’s more, there are even buying cooperatives where similar businesses get together to make large volume purchases in order to get substantial discounts.
Furthermore, don’t be afraid to let go of your old inventory at discount prices. This way you’ll get more cash for operations and investment.
Generating healthy cash flow should be applied to all areas of business. For example, you may give up a bank account not bearing interest or let go of customers who cause more trouble than they’re worth. Being a savvy business owner means involves making the tough decisions to improve cash flow and drive incremental growth.See Business Lenders