No matter what kind of business you are running, cash flow is of exceptional importance. When you’re just starting out, it can be extremely difficult to manage if your cash flow is not flexible enough. So how can you grow your business if you don’t have the cash flow to back it up? Here are several tips to help you do it.
- Start by charting your cash flow so that you can understand how money flows through your business. Look at when money comes in, how quickly it goes out, and where it goes.
- Diversify the products and services you offer so that you don’t have to deal with seasonality. Your quietest times will be when you need cash the most.
- Create procedures for chasing debts and stick with them. According to research from PricewaterhouseCoopers, almost a fifth of all companies see their levels of debt as the biggest threat. Make sure that you’re following up on debt with phone calls after a certain amount of time. Invoices should be reissued a certain number of times, and then the longer the debt goes unpaid, the more serious the measures for debt collection become.
- Make sure that you understand the payment cycles of your customers. Most of them will pay their invoices at a set date during the month. Be sure to work that into your control system. Waiting an extra month to collect your money can be a big squeeze on your business.
- Be careful when invoicing. PricewaterhouseCoopers found that the greatest reason for non-payment was connected with inaccurate invoicing. Get the amount right and send it to the right place.
- Collect your debts using a third party, but be careful when choosing a collection agency. You want one that has a high rate of collecting debt, but that also does it in an ethical way. Outsourcing your debt collection will enable you to focus on your current customers.
- Set clear terms and conditions with your customers. This will ensure that there are no misunderstandings and make it more likely that you will be able to collect outstanding debt later on.
- Don’t buy things until you actually need them and try to spread out the payment instead of paying it in one lump sum. Lease major ticket items instead of buying them outright so that you don’t have to pay a lot of money in a short amount of time.
- Look for ways to trade your products and services for the things you need. Often you’ll have extra inventory when you have less cash, so try to use that extra inventory to give you some extra buying power.
Every business owner must understand the finer details of cash flow. If they don’t, then disaster could strike. Cash flow problems are a reality for almost every business in operation today. If you don’t know how to handle them, you could be required to close the doors. Prepare yourself for those problematic days by arming yourself with the tips above. And don’t be afraid to ask for help from an expert.
Let the business experts at Acceler8 help you find creative ways to improve your business’ cash flow. They specialize in helping business owners and entrepreneurs realize their goals and dreams by creating a value in their business that is both transferable and sustainable. They have developed a systematic approach that provides owners of businesses of all shapes and sizes with practical advice, ideas that are timely, and tactics that are sure to help you increase your profits, revenues, and business value. Call Acceler8 today to find out more.