When you’re running a business, your cash flow is critical. There is much you can’t do without cash in your pocket, and even more that simply isn’t advisable to do without cash.
Here are 14 tips to help you manage your cash flow better:
- Keep an eye on your budget at all times. You’ll be able to manage your business better if you can anticipate cash shortages, and the only way to do that is if you’re watching your budget and expenses.
- Get the invoice into the customer’s hands and don’t stand for late payments. Don’t wait to send out invoices because it just delays payment. As for those customers who think they can put off paying you, chase them down!
- Create an alarm system. It doesn’t take long to notice a pattern. When certain things happen, you find yourself low on cash. Use these indications to create an alarm system for your business which tells you that you could run out of cash.
- Look for trade-offs. When your cash flow is heading toward critical (or if it’s already there), look for some trade-offs in terms of your business objectives or profitability.
- Shorten credit periods and factor debts. Having customers that owe you money isn’t the same as having the cash in your pocket already. Get the money in there faster by tightening up your payment guidelines.
- Offer incentives. Every business hits a dry spell once in a while, but you can overcome these dry spells by offering temporary incentives and discounts for new customers and/or customers who make their payments in cash rather than credit.
- Let vendors compete for your business. Cutting unnecessary costs is simple when you begin taking a look at your vendors to see who is willing to work with you and who isn’t. Negotiate to get better payment periods and shorter lead times on deliveries.
- Control your stock. You should have a system in place that enables you to control your stock better so that your cash isn’t tied up in product that’s just sitting around.
- Turn away business if you can’t finance it. For long term contracts or large orders, get a deposit up front and/or establish payments at various stages rather than one lump sum later.
- Take stock of your cash flow situation before embarking on any major business situations. Anything that increases your overhead can become like an anchor on a sinking ship. If you need to invest in new assets, consider leasing instead of purchasing.
- It’s about who you know. Establishing solid relationships with both suppliers and financiers is essential so that you have a place to go when things start to get rough in the cash department.
- Arrange for financing before you need it. It’s never a good idea to wait until you need financing to get it. This just makes you a bigger target to be taken advantage of. If you don’t have the cash to cover the interest on large purchases safely, then look for equity investments to set up the financing.
- Dump the negatives. Any assets that aren’t bringing in any money are just weighing you down. Get rid of them by selling them or ending your business lines with negative cash flow.
- Remember the short term fluctuations. Keep several views of your budget in mind: weekly, monthly, and annually. There are fluctuations that don’t show up in those short term budgets, and you can’t afford to forget about them.
Acceler8 can help you diagnose and solve all of your cash flow problems.
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