It’s a simple concept we all know: cash is the lifeblood of a business and unless it’s properly managed an organization won’t survive. But in practice, many businesses do not dedicate sufficient attention, thought and planning to cash flow, leaving them vulnerable to all kinds of challenges. The tips below are designed to help companies of all types increase cash flow.
Send Invoices Promptly. A company may produce a stellar product at a fair price, and take tremendous pride in its sales. But if they aren’t billing customers promptly and collecting the money owed to them in a timely manner, it’s for naught. Sole proprietors and bookkeepers alike need to treat invoicing as a top priority, and not get so busy with other duties that it gets delayed. If customers are comfortable with it, invoices should be emailed for even faster payment. (Saving money on envelopes and postage is a benefit too.)
Carefully Set Credit Terms. A business should reevaluate its credit terms and clientele periodically. Do you have a history of new customers that are slow to pay? If so, new customers should be asked to pay a retainer or downpayment and the credit manager should do a more thorough job of checking references before setting credit terms. Are longtime customers taking too long to pay? Perhaps charging interest fees or offering an early-pay discount will entice customers to pay on time. Regardless of the policy changes made, customers should be advised in advance of the date the changes are implemented.
Accept Credit and Debit Cards. For smaller invoice amounts, consider accepting credit or debit cards. While it’s true the organization will pay processing fees (typically monthly as well as per transaction), payment is made directly into a designated bank account within a few days. This affords peace of mind and will make it much easier for the business to pay its own bills. Accepting credit cards may also bring in new customers who need or prefer to pay in this manner.
Review Contracts. Even if a business isn’t struggling due to current economic conditions, it’s a smart practice to review all contracts and explore whether a more favorable rate can be set. This applies to landlords in particular if there is ample commercial real estate for lease in the area, but don’t overlook contracts for maintenance, business insurance and health insurance.
Monitor Inventory. Some companies fall into the trap of re-ordering parts based on previous orders, and only concern themselves with a taking an inventory once a year. A full or, depending on the size of the business, quarterly partial inventory may identify an opportunity to reduce future purchase orders, which would improve cash flow.
Consider Accounts Receivable Financing. This option will convert Accounts Receivable to cash immediately, which allows the organization to focus on growth rather than cash flow. Liquid Capital can provide this service along with credit and collection services and cash processing at no additional cost. In fact, the cost of AR Financing is often about the same as offering cash discounts, yet the additional services provided make it a far better value with much more certainty of cash availability.
The bottom line is if you plan and manage your cash flow wisely your business will be able to grow and thrive.
This blog is brought to you by the Moss team at http://www.moss.liquidcapitalcorp.com/, check them out for all of your alternative financing needs.