12 Ways to Improve Your Business Cash Flow
By Debbie Gregory.
Managing your business cash flow can be challenging but it is incredibly important to the success of your business.
Below are 12 easy ways to help you improve your cash flow:
1.) Put It All In Writing
Make sure that all your business documents, customer agreements, and invoices clearly set out your payment terms, expectations, due dates, etc. Never leave any important items ambiguous.
2.) Send Invoices Immediately
People tend to pay once they have an invoice in hand, never make them wait.
3.) Include a Specific Due Date
It is very important to make your expectations as clear as possible. Simply stating “due upon receipt” is not enough. Add a clear due date or time frame (such as “payment due within 30 days of the bill date”).
4.) Offer an Incentive for Quick Payment
People love getting things for free. If you can offer them some sort of incentive for paying early, they will be more motivated to do so. For example you could give them a small discount for paying within a week of invoicing.
5.) Add a Late fee
Adding a fee for being late with payment tends to motivate most to get the bill paid quickly. Without a late fee, some people may put off paying you for months.
6.) Put together a Payment Plan
Allowing people to pay off large bills over time allows them to better budget for the expense and makes it easier for them to pay the bill.
7.) Use Electronic Billing or Electronic Funds Acceptance
Using electronic billing allows you to get the invoice to the customer very quickly as well as saving you money on postage costs. Accepting electronic payments works the same way. It is fast and cost effective. You want to make sure that you accept payment in a variety of ways to make it easier for people to pay you.
8.) Sell your Invoices
If you need cash fast, there are services out there that will pay 90-99% of your original invoice amount upfront for a small fee. Make sure they are reputable and do not harass your clients.
9.) Hold off paying your own bills
While you wait for your own clients to pay you, hold off on paying bills until they’re actually due. Of course take advantage of any incentives for early payment, but wait on the others.
10.) Secure A Credit Line
If you need help with your cash flow consider a line of credit with your local bank.
11.) Actively Monitor Your Cash Flow
Keep a close eye on your cash flow. Make sure that you know what has been paid and what is about to become due. Send reminders if necessary and make sure that you track any late fees.
12.) Hire a CPA
A CPA can help you in many areas. They can guide you towards your financial goals, offer corrective suggestions, ensure you are taking advantage of the correct tax breaks or benefits, improve your cash flow, and so much more. They can pay for themselves in savings.
