Cash flow is vital for business success, but there are many things that can impede it, such as customers paying invoices late or products selling more slowly than anticipated. Waiting for money to come in eventually will not just cut it if you want to run a successful operation so you need to take steps to maximize money coming in on a regular basis so it is there when you need it.
Organize Your Billing
Disorganization is a major contributing factor to losing money, wasting money and not making as much money as we can in our business. Shoddy organization of your accounts receivables may be impeding your cash flow because you are not getting on top of late payments as quickly as you should. Automated billing software lets you track the age of accounts and immediately notify you when an account has gone past its terms.
Monitor Inventory More Carefully
Lots of money is tied up in inventory waiting to be sold and this is a necessary part of doing business, but if you are not monitoring inventory more carefully, you may be tying up more cash into it than necessary, which limits money available to you right now. Careful tracking will help you know when to take up the supplier on that discount for a larger purchase or when to pass and keep the cash for something else.
Offer a Discount for Paying an Invoice Before it Is Due
Customers love to save money and you love to get paid as soon as possible; consider offering some sort of discount for paying the invoice within a certain time frame before the actual due date. It may be a fixed amount or a percentage of the total bill.
Make Your Business Credit Card Friendly
If you are not accepting credit cards for your business, you may be missing out on extra revenue. Studies have shown that individuals and businesses spend more when paying by credit card than by cash..wonder why? Offer customers the options to pay invoices with credit cards and you will get paid faster. With so many different credit card processors on the market, you are in a good position to negotiate rates for fees and equipment.
Make it Easier to Pay By Check
If your customers pay you by check, make it as easy as possible. There is software available that lets you create a check based on information your customer sent you by email, fax or over the phone. There are also online services that allow your customers to send a ‘’check’’ through email, which you can print and put into your bank account.
Evaluate How You Pay Suppliers
When it comes to cash flow and paying your suppliers, there are couple of ways you could improve cash flow and the best one would depend on your individual business. Waiting to pay them until right before the invoice is due helps you hold onto cash longer while invoices from your customers are coming in. On the other hand, some suppliers may offer discounts as an incentive to pay an invoice early, which could also boost your cash flow, perhaps significantly when you look at it over the long-term.
Look to Switch Certain Clients to a Retainer Structure
If you have many clients where you are not regularly providing them service but work more on a project-by-project basis, switching them to over to a retainer-fee system may help improve cash flow. They would pay you a monthly fee that would entitle them to a certain number of services should they need them; some sort of discount or value-added service could be offered to encourage the switch; overall profit from the customer could drop but cash flow would be more predictable.
Evaluate Suppliers More Carefully
You may be able to save money by switching up where you buy your supplies and equipment. Many companies may use a third—party reseller to facilitate software contracts or help them assess the right equipment for their company needs, and subsequently purchase it, but for things like printer cartridges, their mark-up may be costing you more and you could get these items more cheaply somewhere else.
Make Sure Staff are Handling Accounts Properly
If your cash flow is suffering, it is a good idea to evaluate how your company is handling accounts. What sort of notification system is in place for past due invoices? Are there any reminders a certain time period before an invoice is due? How do you handle customers who are past-due?How are invoice disputes handled and resolved?
Consider Accounts Receivable Financing/Factoring
Accounts receivable financing may be a good option for your business. These companies will pay you a percentage of a customer’s invoice and hold the rest in reserve until your client pays you minus the fee for their services. This is only an option for credit-worthy customers, however; your credit is not a factor. This will allow for immediate cash flow improvement.
Kelli Cooper is a freelance writer who covers a wide range of business topics. Follow the link to learn more about financing of accounts receivable.
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