Cash flow is what makes or breaks a business, and that is something many entrepreneurs do not realize until it is too late. You can have millions of dollars in revenue, but if you do not have available cash you are not going to be able to stay in business. Here are 5 easy tips to ensure you always have the cash you need to run your business successfully.
This is where the cash flow train usually stops. You have revenue, but if no one is paying then you do not have cash, and cash is what pays the bills. Of course the collection process is essential, but leaving it all to collections is going to cause more stress than is necessary. There are other things that can be done to shore up the receivables cash leak before collection is even on the table.
They will not pay until they get a bill, so get them the bill as soon as possible.
Offer a discount for paying quickly, and even more for paying in cash.
Ask for or encourage down payments. You can require it, or you can offer incentives such as a discount for those will to pay partially up front.
If receivables are a desperate cash flow issue, consider selling them to give yourself some breathing room. There are many companies now involved with this type of financing. Biz2Credit can help you find the best deal.
Negotiate Terms with Vendors
Paying the bills for your business is the other side of cash flow. Negotiate with your vendors to whatever extent possible to get the payment terms in your favor. Aim for enough time to complete the job for your customer, invoice them, and get paid before you have to pay the vendor. Thirty days or more should do it in most cases. Of course this will not always be possible, but it is helpful when it is.
Pay Bills Only When Due
By no means should you pay late, as that is absolutely counterproductive, costing even more money in late fees. However, there is no reason to pay bills days or weeks in advance. Simply pay them in enough time to stay current so that the cash can be used in your business as long as possible. Take advantage of online and phone pay options to pay on the same day as the due date when possible.
Line of Credit
Consider a small business line of credit to draw on when needed. This can be a priceless tool, and while banks and credit unions may not always be a viable option, many alternative lenders are excellent options for small business financing. Biz2Credit can help secure lines of credit at reasonable interest rates.
Stay on Top of the Financials
This is important for many reasons, and cash flow is one of them. By paying attention to patterns and trends on the financial statements, you can easily see where the cash leaks are and shore them up before it is too late. This includes balancing and analyzing the bank statement each month. If you cannot do it, find someone who can.
While revenue is the heart of s successful business, cash flow is the blood it pumps. Without the blood the heart is useless, and the rest of the body, or business, will not survive.
This article was submitted by Faith Stewart, he has a BBA with a major in accounting and spent 10 years working in the various aspects of accounting and finance before pursuing her passion for writing.