Cash flow problems can make or break your small business. Here are some tips on how to avoid negative cash flow setbacks and stabilize your company’s finances.
1. Understand That Getting Products Takes Time
Planning on having a product by a certain date without giving your company some leeway will make your business look bad and doesn’t give you any flexibility. Shipping products takes time and merchandise rarely arrives on time or right when you need it.
2. Cash Comes In Slowly – So Prepare
Paying the bills is unavoidable but waiting for money to come in can slow down the growth of your business. Mapping your company’s cash flow will allow you to strategize your spending and help you ensure there are no surprises as well as give you warning if your cash flow projection shows there may be trouble ahead.
3. Increasing Receivables
Waiting to be paid for a sale or a service rendered can hurt your business’s cash flow. There are ways however to speed up the process of turning your products into receivables and those invoices into cash. Offering incentive to customers and clients who pay their bills rapidly, delivering invoices quickly and following up with slower payments, or requesting customers make a deposit payment upon ordering are all ways to increase your cash flow rate. If you can’t afford to wait for payment, try selling accounts receivable to a factoring company like Factor Finders. Accounts receivable factoring ensures you the future of your business doesn’t sit at the mercy of customer payment.
4. Manage Your Expenses Wisely
Using an electronic payment system will let you make payments on day before or the last day they are due which will enable you to keep the use of your funds for a longer period. If the cost of your expenses is rising faster than your sales, your business will have a problem; being smart about your capital will help you avoid this cash flow problem.
5. Build Relationships with Your Suppliers
If your business is unable to make a payment at some point or must make a late payment, having a good relationship with your dealer will help you gain some latitude and their understanding.
6. Set Up A Line of Credit
Banks are much more willing to lend money to businesses who don’t need it immediately and it is far easier to arrange a line of credit at the bank in advance as a safety net than at a period when you are pressed for time to get the money.