How to Better Manage Your Small Business Cash Flow
Sound management of cash flow is a crucial aspect of business success. Numerous businesses fail because they ignore cash flow or manage it poorly. Positive cash flow means that your income exceeds your expenses, while negative cash flow indicates that you spend more than you bring in. Be sure to periodically track your business cash flow so you always know where you stand. Here are some tips to help ensure that your cash flow always remains on the plus side of the ledger.
Offering discounts for early payments inspires your clients to promptly settle their bills. Although this tactic may cost your business a minute percentage of profit, at the same time it ensures that much-needed cash flows swiftly to where it is needed rather than being tied up in unpaid receivables.
Provide your clients with methods that make it easy for them to pay promptly. For instance, depository transfer checks are inexpensive means of transferring funds. Preauthorized checks allow banks to draw funds from the accounts of your clients at agreed-upon times. Another option is a lockbox service, which banks use to quickly process payments by check.
Be Cautious With Credit
Accumulating sales on credit is not the same as generating profits or increasing cash flow. Before offering credit to customers, be sure that they can expediently pay their bills. Have clients fill out credit applications. Run a credit check and request references. Although accepting credit cards costs you a small percentage of sales profits, the method ensures that you receive payments when you need them.
Obviously selling more products or services increases profits and enhances cash flow, as long as you receive customer payments and don’t accumulate unpaid receivables. Analyzing the needs of existing clients is an inexpensive means of increasing sales. However, don’t neglect the essential ongoing investment of money and time in the acquisition of new customers.
Obtain a Loan
Sometimes unexpected cash flow crises necessitate the securing of a bank loan. Establish relationships with financial institutions during stable business times, so that it’s easier to obtain a loan when you need one.
For more advice on business cash flow, contact 8th Street Capital.