Today, one of the challenges faced by the small business is to manage cash flow. Good cash flow management is necessary for every business. You need to understand every inflow and outflow of cash. Most of the failures in business occur due to poor cash flow problems, receivables, narrow payment terms and more. Therefore, you need to establish proactive strategies to avoid these problems and create new opportunities for your business.
Here are some simple tips for better cash flow management of your business.
Sound credit practices & valuation
When dealing with new customers, it is important to follow sound credit practices. Know the creditworthiness of your new client by conducting a trade reference and a bank reference. This decreases the risk of non-payment. Implement the process of periodic payments to let your cash flowing consistently.
Online invoicing software:
Opt for online invoicing to ensure that business does not face any financial crisis due to delayed payments and other issues.
Core aspects of online invoicing benefits
- No need of ink, printer or paper when opting for online invoice system.
- Create an informative invoice which provides smooth details on all aspects
- Graphs, charts, have to be properly segmented
- Quick payments from the foreign clients because of online payment transactions
Using online invoicing software like Invoicera makes your recurring task easier, instant payments anytime anywhere, manage subscriptions, automation of business processes and communication, time tracking, staff management and more. Invoicera helps you to get paid faster and make invoicing easier.
Pay deposits promptly
It is always a healthy business sign when you have optimum working capital available. Also, establish the revolving line of credit for your customers to avoid potential cash flow crunches. And the sooner you make a deposit; the sooner you can put the money to work for your business. This speeds up your business cash flow and makes funds available for daily expenses.
Offering discounts on prompt payments is a widely used technique to encourage customers for making timely payments. Given an incentive, some customers will pay sooner rather than later. Trade discounts typically give 1% – 2% discount the total amount due if customers pay within a certain no. of days. This option can help you increase product offerings and more.
Saving funds promptly
Set subscriptions to automatically generate an invoice. Make sure to invoice your customers without any delay with online billing software. Get paid faster as fast as you mail an invoice. Generate customized invoices including a payment due date along with terms and conditions and invoice notes.
Payment follow up automation
Set reminders using online invoicing tools to avoid remaining overdue invoices for a very long time. You can even ask delinquent customers with genuine financial problems to try to pay at least a small amount periodically. When necessary, don’t hesitate to seek professional help from an attorney or collection agency.
Cost reduction analysis
If you’re not sure an expense is necessary, hold back until you are confident it will have a favorable impact on the bottom line. Reduce operating costs such as switching from a weekly to a biweekly payroll to reduce payroll processing costs. Be careful not to cut costs that could hurt profits. For instance, rather than cutting the marketing budget, redirect the money to areas where it has a more positive impact.
Even though you are required to pay your bills on time, you can take the liberty to pay as late as possible but only to an extent where you do not incur late fees or interest charges.
Painless inventory management
Inventory management is essential to maintain proper cash flow. Less cash tied up in inventory would invariably result in better cash flow. Also, make sure to order for additional inventory when current inventory level is down to bare minimum.
Each of these tips is viable for your business. Focus on these tips for better cash flow that benefits your business. Go ahead and share your comments below.
About the Author
Veronika Tondon is business enthusiast. She writes about emerging technologies and opportunities for business. She is working as a Marketing Manager with Invoicera, a leading cloud invoicing solution.