Cash flow refers to the movement of cash in and out of your business in terms of income and expenditure. No business can afford to ignore its cash flow. Monitoring this is like monitoring your business pulse-it’s a crucial health check for your business.
To build a more stable cash flow, here are five tips to better manage and control cash.
1. Ask for a deposit first
Requesting a deposit ensures that the client is serious and can pay while also providing you the cash necessary to start work. If the client backs down at giving a deposit, ask them for current financial statements that show they can pay your invoices on time. For on-going services and to receive cash sooner, try suggesting a retainer model or payment upfront versus in arrears.
2. Invoice on time and follow Up
The sooner the invoice goes out, the sooner the cash comes in. Ask customers to confirm receipt of invoices and follow up until you have confirmation. Send an email reminder a few days before the invoice is due and the day it goes past-due. Many accounting programs offer the option to send out email reminders, which frees up valuable time and documents your follow up in writing.
If the customer does not pay within a week of the due date, make a follow-up call .Be consistent and persistent. Develop a policy that stops future orders or services until payment is received or the client arranges a payment plan.
If customers are not paying their invoices after 90 days, involve a collection agency that works on a contingency basis, so if they don’t collect, you don’t pay.
3. Strategize on revenue
Look for opportunities within your company to increase revenue for example you could;
- Tap in to the current market that might make your product more attractive to a different audience
- Use incentives with your loyal customers to help promote your products
- Bundle less popular items with more popular items for a small price increase
By planning and implementing a strategy to develop new markets, you’re expanding your business while keeping money flowing into your organization.
4. Negotiate discounts or payment terms
Reach out to your suppliers. They may have excess or aging inventory and willing to offer discounts.
Negotiate for extended payment terms but be careful not to seem like you’re struggling financially and may not pay otherwise you risk being asked for a deposit.
5. Streamline your business
Explore your entire business operation and come up with ways to cut on business expenses. The old adage “time is money” is famous for a reason .For example you could try;
- Replacing systems by implementing better software
- simplifying time-consuming processes to eliminate costly overtime pay
- Eliminating travel costs and travel time for staff. Most customers are familiar working remotely, use of phone and online instead of in person are now more receptive
- working remotely for select departments making you save on office space
If you find ways to make your business more efficient, you will also save money.