4 Tips to Help Boost Your Cash Flow
As the saying goes, cash is king, especially for small businesses. Smaller enterprises rely on cash coming into the business as fast as possible to pay for stock, to pay wages and for basic business costs such as rent and utilities. Here are some great ways to manage cash flow in your business:
1. Shorten your payment terms
Many businesses offer their customers 30-day payment terms, but if you want cash to come into your business faster, consider shortening your payment terms to 14 days. It might be hard to reduce payment terms for existing customers, but you can move to 14-day payment terms for new customers.
2. Encourage customers to use PayPal
Many online-only businesses offer PayPal as their exclusive payment option. Doing this encourages customers to pay for their purchase when they place their order — a great way to ensure the business is cash flow-positive on an ongoing basis.
3. Chase invoices as soon as they fall due
It's a well known fact that the longer you wait to chase an overdue invoice, the longer you'll wait for it to be paid. Instead of chasing debtors at the end of the month, make sure you chase invoices as soon as they fall due.
4. Send invoices as soon as the product is ordered
Many businesses also wait to the end of the month to send out invoices. But this only extends the time you will have to wait to receive funds for purchases. An alternative is to send out an invoice as soon as the order is complete. Or better yet, send an electronic invoice.
Great cash flow management is all about being constantly vigilant about collecting payments, following up debtors promptly, and maintaining accurate accounting systems using tools such as Freshbooks.