Efficient management of cash flow is crucial for small businesses. The prosperity and growth of your company depends on it. Here are some tips to strengthen cash flow so that your business can thrive.
Track Cash Flow with Software
The first step in improving small business cash flow is to carefully track the movement of your finances. This can be unnecessarily time-consuming if you attempt to do it without the right kind of software. Instead, make use of one of the cutting-edge digital tools available for cash flow management.
Provide More Options for Payment
Make it easier for customers to pay their bills by offering them more ways to submit payments. These may include ACH payments, debit and credit cards, and payments from mobile platforms or digital wallets. The convenience of all these options will enable clients to get the money into your accounts quicker and more easily.
Eliminate Long Payment Terms
Some clients take advantage of small businesses by delaying payments as long as they can. In effect, this gives them an interest-free loan of money that is due to you. To avoid this, reduce payment terms, and follow up promptly on late payments. To help steady your cash flow, match the terms of payables to your suppliers with the terms for receivables from your clients.
Remind Late-Paying Customers
Send email reminders if customers are even a day late paying their bills. If reminders by email seem unsuccessful, phone them and talk person to person. Often this personal touch is what prompts them to follow through with their obligations.
Factor Accounts Receivables
If long payment terms are necessary to remain competitive in your industry but you need the income to strengthen your cash flow, consider factoring your invoices. This involves selling the unpaid accounts receivables to a factoring company, which advances you 70 to 90 percent of their value. When your clients pay, you receive the balance minus the factoring fee.
For more advice on improving small business cash flow, contact Park Cedar Commercial Lending.