Improving Cash Flow in Tough Times
A common challenge for many small businesses is the
feast-or-famine nature of managing
cash flow. Poor
cash flow can mean certain doom of an otherwise healthy business.
Beware, a cash flow crunch can sneak up on you if you aren't
prepared. It can affect a company experiencing a slowdown or
one that is rapidly expanding.
Here's a list of a few simple ways to improve your cash flow
position:
Accept Responsibility For Minding Your Company's Cash Flow
- Even if you hire an accountant to help keep the books, don't
expect them to tell you everything you need to know. Stay
informed and educate yourself on how best to manage your business
finances.
Bill Promptly and Accurately - Billing right away for your
products or services will only help to facilitate a prompt payment.
Also, avoiding billing errors and mistakes will not only increase
payment turnaround, but will help to build trust with your customer.
There's nothing like regular billing errors to strain a business
relationship.
Actively Monitor Your Cash Flow - You should always know
the financial status of your business (monthly sales, expenses for
the month, how quickly clients are paying, etc.).
Avoid Slow Pay/No Pay Customers - Don't be shy about
checking credit references or even paying for a credit check if the
client is significant enough.
Regularly Analyze Your Finances and Adjust Your Strategy
Accordingly - Actively monitoring your cash flow helps
catch small problems before they become unmanageable. If
something is off, start asking questions until you get answers.
The answers will help to define your business strategy.
Organize Backup Financing or Cash Reserves -
Factoring, lines of credit
or even equity financing can help get you through a cash flow
crunch.
Lease Instead of Purchase - Although leasing costs more in
the long run, buying on an installment basis means less cash up
front and can be a boon to your cash flow.
Control Spending - Look over your expenses and see where you
can trim the fat without causing the business to suffer. Add
employees slowly and cautiously. Watch inventory and be careful not
to over stock (this can easily bleed your company of cash).
Accelerate Receivables - Don't be shy about asking customers
for advance payments and reward early payers with a discount. Just
putting out friendly reminder calls ("Did you get my bill, when can
I expect payment?") can significantly augment your cash flow.
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