When you run a business, it is really important that you have enough money to get you through those tough times, or even to give the company plenty of cash to fall back on if things don’t go according to play day-to-day.
With that in mind, let’s take a look at 10 things you can do to improve your company’s cashflow right now:
- Set targets to aim for
When it comes to controlling your cash flow more effectively, one thing that you will need to do is to have an ongoing cash flow forecast which sets sp[ecfici targets for a specific period of time based on projected profits and projected expenses for that time period.
By having these targets in place, it is fast easier for you to adjust your budgeting depending on how much money you have left for the cash flow forecasting period, and that means you are less likely to make poor spending decisions going forward.
You won’t always meet your targets, but you will be less likely to waste your resource or harm your business when you have a ballpark figure to aim for.
- Invoice immediately
If you want to keep your company’s cash flowing, then it makes sense to invoice for work you have completed very quickly. If you do not invoice immediately, waiting a week or a month, then you will likely have to wait for a mother week or two for the client to pay up, and if this is the case for all of your clients, you could find your bank account running dry.
Send a digital invoice as soon as the work has been completed and approved and not only are you going to get the money much sooner, but you will also have a digital record that it has been sent, which will make it much easier to deal with any payment disputes that crop up down the line.
- Have strict payment terms in place
Of course, one of the most common causes of poor cash flow within a company is clients who do not bother paying up at all. When this happens, it can very quickly cause problems for your company, and that is why it is so important that you have strict payment terms in place to discourage non-players and encourage more clients to pay up early/ on time.
What should your payment terms look like? First and foremost, they should be very clear. Your clients should know exactly what is expected of them and what is going to happen if they do not stick to the terms of your agreement.
When it comes to terms that will encourage payment, then stipulating that clients will be charged a late payment fee can work very well, as can offering a discount if they pay up within 7 days of invoicing, even though they may have 30 days in total to pay.
- Opt for online payments
If you want to keep the cash flowing, then stop accepting cheques and banker’s drafts, and other slow methods of payment and instead opt for online payment solutions including bank transfers and debit or credit card payments. Doing so will mean your company gets access to the funds much more quickly and that means you will never need to struggle through while you wait for a cheque to clear.
- But ensure that payment is simple
Of course, it is also important that any payment methods you accept are as simple for the client to use as possible. If it is more difficult than it needs to be for a client to make a payment, then it is more likely that they will hold off from doing so for as long as possible and that really will not help with your cash flow situation.
How do you make it easy? By accepting as many payment options that are convenient for you as possible. So. although cheques and other slow methods will be out, bank transfers, PayPal payments, and credit cards should all be accepted as a minimum where possible.
- Use payment packages
Some small businesses find that using payment packages is a good way to better ensure cash flow is good and steady. What are payment packages? basically, on a periodical basis, you offer to sell your clients a package that will cover X number of work hours or X pieces of work to be completed.
By purchasing these packages in bulk, the client can save money, and you can also get to grips with your cash flow because you will be able to bill in advance for various projects, which means you will have a guaranteed income for that period.
It isn’t possible to offer payment packages in every industry, but if you work in an industry where you think it is possible, it is a really good way to build more financial security into our business.
- Rent instead of buying
Something else that can really help you monitor your cash flow more carefully is to rent various pieces of equipment instead of buying them. Everything from commercial iPad rental to office furniture rental is possible, and when you are a small business with a small cash float, renting on an as and when needed basis can be the better choice because it will not deplete all of your funds.
Of course, if you will need to use X piece of equipment very regularly, then it may work out cheaper to buy, but you should always make that assessment before deciding whether to rent or buy.
- Don’t make profit the priority
Yes, it is fair to say that the ultimate aim of any business is to make a large enough profit for the company to be successful, but as a small business, especially when you are just starting out, it is often better to focus on maintaining good cash flow than it is to focus on your profits.
Why? Because if your cash flow is not good, then you may well run out of money to do the things you need to do to build a big profit in the future. If your cash flow is in good shape, the profits will soon follow.
- Stay in touch with the bank
When you run a small business, having a good relationship with your bank is vital for your cash flow. If your bank knows you well, knows you are responsible, and is kept up to date with your financial situation, they are far more likely to offer you a line of credit to keep you going through lean times. So, be sure to cultivate a pleasant and long-lasting relationship with the bank you hold a business account with.
- Sell bad debts
If a client will not pay., then you might want to look into enlisting the service of an invoice trading company. These are companies that will buy up your unsettled invoices for a percentage of the invoice amount. Yes, you might end up being paid less for the work you have done, but it is better than not being paid at all, and when cash flow is in bad shape, it can be an easy way to get a quick monetary injection.
As you can see, improving your company’s cash flow need not be a difficult or particularly time-consuming process in most cases, but it will help you to run your business more efficiently and predict the future more accurately, so it is really worth taking the time to manage your cash flow more efficiently today.