Cash flow is essentially the rate and regularity with which money enters and leaves your company. If you are a small business, cash flow is a very important thing; you might be running fairly close to the margin, and if the cash going out is more dramatic than the cash coming in, you could be in some serious trouble. The truth is that managing your cash flow can be fairly simple if you keep a few tips in mind. Think about where your business is in terms of money, and consider how these simple cash flow tips can even things out for you.
Getting Paid Promptly
Every business wishes that their clients would pay on time, but the truth is that this is harder to manage than you might think. It is all about the money that you have coming in, so make it to the person’s advantage to pay you on time or even early. This does not mean turning things over to a creditor. Instead, offer people incentives for paying on time, whether it is a very small discount off of their next order, or a small gift. You can give a larger incentive if they pay on the spot. This is something that can make a huge difference to how much money you have coming in.
Longer Payment Times
If you are working with a number of people that you need to pay, see how long they can give you to pay off your debts. Sometimes, the difference between paying now and paying two weeks from now can keep you afloat in an iffy situation. If you are willing to pay a little bit extra to take longer on the payments, you’ll find that keeping the money in your company for a longer period of time can help you get more accomplished. You should always pay your debts in a prompt matter, but see if you can determine what “prompt” really means.
When you are someone who is accumulating more derelict accounts than you like, consider selling your invoices to an invoice factoring company. While you will receive less than you would have if the person paid in full, you’ll find that it is often better than receiving no money at all. This is a bit of a last resort option; you should definitely give the people who owe you money every opportunity to pay, but if they have exhausted every opportunity, it is time for you to look into other options. Invoice factoring gives you a chance to collect on older accounts when you might otherwise have nothing.
When you are a business that uses a lot of products from different places, you’ll find that you need to look into creating an account. There is something very satisfying about paying for everything up front, and of course you can continue to do so, but when you create an account with one of your vendors, you are setting a system which will give you some space if you need it. Create an account, and keep it paid up. This is a great way to maintain your cash flow.
Use Different Vendors
It is tempting to use the same vendor for everything, but that is not going to get you the best prices. While it might take a fair amount of bookkeeping to keep things straight, you’ll find that going to a number of different vendors will help you keep your cash flow active and your company running on a tight budget.
There are many different ways for you to maximize the cash flow of your business, so pay attention. The key to getting your business going is to always be thinking about your money.
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Nicola Byrne writes for Calverton Finance, a UK accounting company specialising in payroll through their Payfactory service.