Saturday, 12 Oct 2013
If you run a small business, then you know just how important cash flow is. It doesn’t matter how well your sales are doing – if you have more cash going out than coming in, then you are in trouble. Solving cash flow issues isn’t always easy, but there are some things you can do that will often ease the situation.
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If you’re one of those people who likes to pay their bills as soon as they come in, then you are damaging your cash flow. You may have the money in the bank when the bill arrives, but that’s where you want it to stay. You might find the idea of not paying until the last minute a bit uncomfortable, but doing this will ensure that you have cash on hand when an emergency strikes. To make this easy, set up bank payments for all your bills online, and schedule them for a couple of days before the final due date of each bill.
If your cash flow problems are constant and not just temporary, take a look around to see what loans are available. Even if you can’t get a line of credit from your bank, there are other options – such as unsecured small business loans from lenders such as Advance Funds Network. You will typically be able to borrow a percentage of your annual sales if you go down this route, and you are likely to get a loan within a few days. While you may pay a slightly higher rate of interest than you would with a bank loan, it is still a much less expensive option than maxing out your credit card.
You want to pay as late as you can – but you want your customers to pay quickly. To encourage this, offer them an incentive such as a discount for early payment. They will almost certainly pay early if you can afford to give them 10% to 20%, but if you can’t, then even a 5% discount can make a real difference. However, if you do offer these discounts, it is important to treat the sales as though they were at the discounted price. This way, if someone doesn’t pay early, then at least you will get more than you were expecting when the payment finally comes in.
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Finally, customers aren’t going to pay you if you don’t ask them to pay. Many companies wait for 30 to 60 days after they receive an invoice before they pay it – no matter when you actually provided goods or services to them. There may be lots of things going on in your business, but you need to be disciplined and get your invoices out as quickly as possible. Also, track whether your clients are paying their invoices on time, and follow up with them when they aren’t. Don’t assume that if a customer is late in paying that they have a problem – and therefore they are not going to pay no matter what you do. Often, the reason that companies don’t pay is simply that they have forgotten.