Make sure your invoices are paid promptly
The first thing that you can do to ensure a healthy cash flow to your small business is making sure that the invoices you issue to your customers are paid on time. The good news is several tactics can help provide success in this area.
Automation of your invoice process, in particular, can help speed up payment. This is because invoices are issued as soon as an order has been placed, and will contain all the relevant online info to make a fast bank transfer (making it easy for your clients to pay). Additionally, with an automated invoice system like YoozPay, you can set up reminders to be sent to clients that have not yet made their payment, which can help reduce the time it takes for them to pay.
Another great tactic relating to invoices is to reduce the payment terms that you offer to your clients. For example, if you provide them with 60 days, you will be waiting 2 months for a product you have made and shipped to come in. Therefore in the meantime, you have to cover the debt with your funds, which can be costly. With that in mind, keeping shorter payment terms for your customers such as 15-20 days is a much better way to ensure a constant stream of income.
Of course, there will always be difficult customers that won’t pay for some reason. Yet, there are options you can explore here too. One of these is to factor such invoices. This means you ‘sell’ the invoice to a specialist company that will give you a percentage of the total amount. They will then take on the responsibility of chasing payment, which means you will save both money and time.
Alternatively, you may wish to use debt collectors to ensure you received payment. Although, of all these options, it’s worth noting that this is the one that often takes the longest, so it may not be ideal if you are already struggling with cash flow.
Reduce your stock
Keeping vast amounts of stock, both of your own products and of the resources you need to run your business could be negatively impacting your cash flow. The reason for this is that items of your own stock sitting in the warehouse aren’t bridging in the value that they are worth until they are sold. Similarly filling your storerooms with more resources than you require in the immediate future means you are parting with money that could be spent in much more constructive ways.
To that end, it’s best to reduce your stock levels as much as possible. With companies that are supplying your business, make sure you have a robust fast, or even automatic ordering service based on when stocks get to a certain level. For your stock, consider hosting a sale to clear space, and then only keep larger reserves of your most popular items from that point on.
Make sure you get the best deal every time
You need supplies to run your business. However, you could be wasting valuable resources by paying over the odds for everyday items. That is why it is vital that you make sure you get the very best deal you can every single time.
The best way of doing this is to strike up good working relationships with the people that you purchase your supplies from. Then you will be in a much better position to negotiate a good deal. Also agreeing to a longer contract can help because other businesses, just like yours, value the security of a long-term customer and the guaranteed income it brings in. So much so they may be willing to lower their prices to secure this.
Hold off on bonus payment
Offering bonuses to members of your team for a job well done is an excellent incentive. However, it is vital that you have a system in place that allows you to wait until the sales they had a part in making are paid for. Otherwise once again you will be making up for a shortfall with your business’s own money, and while you will eventually get paid back you could end up paying out more in banking fees if you go into overdraft in the meantime.
Use credit to your advantage
You can also make sure that cash continues to flow into your business by using credit to your advantage. Indeed, there are two ways of doing this. The first is to go to a lender like Union State Bank and secure a line of credit in advance. Then you will have access to the cash you need to keep your business running, totally independent of how other factors impact your cash flow.
Another option is to use a credit card to breach the gap in finances that your business is experiencing. The good news is that business credit cards often have fairly substantial limits and so can be very handy in a small-to-medium financial crisis. However, it is also important to consider the long-term impact of this kind of financial product, as you can end up paying back a significant amount in interest.
Stop buying expensive equipment
Finally, when looking to make sure that cash flow into your small business stays healthy and consistent, changing the way that you access the equipment that you need can help a great deal.
In particular, putting an end to buying expensive items outright is a great option, because it leaves the majority of the funds in your account so you can access and use them in other parts of your business. Instead, why not consider leasing your equipment, for a much smaller monthly fee? The great thing about leasing equipment is that it will be covered if it breaks down, and is super fast and much less expensive to upgrade when a new item is released, something that again will ensure as much money as possible stays in your business account where you can access to cover the costs that allow you to continue operating.