Cash is king. It is the usual saying in the business world. But surprisingly, few businessmen take steps to manage their cash flow so they do not wind up with a lonely account and nothing to pay the bills.
One of the leading causes of business failure is poor cash flow management. More than anything in their businesses, smart owners of small and mid-business stay on top of their cash flow, observing their cash flow statements weekly or monthly to keep their eye on the pulse of their business. These critical numbers tell you how much is coming in and going out of your business—making more than you spend. It is all good. Is cash flow regularly edging into the red? Not so good.
If you have been less diligent about monitoring your business’s money, follow these eight (8) tips to handle your cash flow better.
1. Check your profitability. Make sure your business is drawing a reasonable profit. Even the most excellent cash flow management will not help if your fundamentals are out of whack. Analyze each service and product separately to see whether it is dragging its weight. Make sure your products are fittingly priced and work to abolish inefficiencies. Chase profitable sales instead of just chasing deals. One needs to always be ahead of the curve in cash flow management.
2. Cut costs. Focus on recurring annual, quarterly, or monthly expenses. Ask yourself the following questions: Can you cut back on rent, utilities, or payroll? Or are you spending money on services or subscriptions you are not using? Or can you renegotiate the terms of outstanding leases or loans?
3. Before you even need one, secure a business line of credit. As opposed to cash flow problems, a business line of credit is a good insurance policy. You may be able to acquire a line of credit for a percentage of your inventory or accounts receivable if you use them as collateral.
4. Stay on top of invoicing. Send invoices when the products are delivered, or work is completed—why wait? Please find out the specific person, job title, and address to send your invoices, so they do not get lost in a shuffle from department to department. Design your invoices to be straightforward to read, with critical areas like due date, the amount owed, payment methods, and where to send payment highlighted. Speed things further by emailing invoices and mobile payment solutions instead of mailing them. Relatively, Wiseteam Consulting offers professional financing solutions made for your business. They are one of the best in Small and Medium-size Business Invoice Factoring. Check out their webpage for more details and expect great things to happen.
5. Instead of draining cash, finance big buys. One of the most common mistakes in cash flow is using money to buy a significant long-term asset instead of financing. Even if you feel flush now, you may suddenly wind up short of cash if you experience a rapid revenue growth or sudden shortfall. Use your cash flow forecast to plan your financing needs ahead of time, not amid a crisis when bankers may be wary of lending.
6. Speed up cash inflows. Getting money into your business more quickly can save you carrying costs on your line of credit. Some tips are sending out invoices more quickly, asking customers to pay electronically, and charging interest to slow-payers.
7. Cushion your cash flow by getting business credit cards. Look for cards with rewards. These can be points you can use toward business or travel purchases. In addition to having a cushion for lean times, business credit cards also categorize your assets, making it easier to track expenses.
8. Speed payments by offering deals. Consider offering your customers incentives for early costs, such as a percentage of the total. Do the math before ensuring the tradeoff ( or getting paid early) is worth the loss ( or less money in the long run).
Being and staying on top of your cash flow is key to making your business a success. Similarly, controlling your cash flow helps you prepare for slow periods, plan your financing and have peace of mind. Do not let a few cash flow missteps put you in a money chomp. All it takes are a few intelligent stirs to keep your company in the zone.