With the uncertainty surrounding COVID-19, many business owners may feel like they’re stuck in a waiting game. But there are things you can do right now to help your business’s cashflow, like delaying big expenses and prioritizing your spending on more immediate needs to get you by, day to day.
Here are a few more ways you can help your business maintain much needed cashflow:
Use digital invoicing.
A digital invoicing solution saves you money on postal costs and allows you to send invoices immediately, so you can bill your customer right when you finish the job. More importantly, digital invoicing can help customers pay faster with online payment options.1
Set payment terms that encourage early payments.
Net 30 may be the most common invoice payment term, but that doesn’t mean it’s your only option. For example, 2/10 Net 30 might increase your cash flow. A 2/10 Net 30 payment term gives your customers an opportunity to save money by paying you early. In plain English, 2/10 Net 30 means that the invoice is due in 30 days, but customers will get a 2% early payment discount if they pay the invoice in ten days. While 2% may be a commonly used discount, you have flexibility to make your own terms. If a 2% discount feels steep, you can lower it to 1%. If you’re really trying to incentivize a customer to pay early, you may want to consider raising it to 3%.
Switch to a line of credit with a lower Interest Rates
Many credit cards offer low introductory rates for new card holders. If you’ve been using the same business credit card for more than a year, you’re likely paying a comparatively high interest rate. Depending on your current balance, you may want to consider choosing a new card that also offers free balance transfers for a limited time. Just make sure you know when any introductory offer expires, because that’s when you’ll start paying higher interest rates.
Redeem your rewards.
If you’ve been using a credit card that gives you cash back or rewards you with miles, this might be a good time to redeem. You can use cashback rewards to pay down part of your balance or choose to receive the cash so you can put it towards other expenses. Redeeming miles or points may vary between credit card companies, so review the terms of your card to make sure you get the maximum value.
Keep your customers informed.
If you’re in a position where your business is disrupted temporarily and may not adhere to customer timeline deliveries, keep your customers informed upfront about the delays. If the customer has already paid you for the goods/services, reach out to them proactively with the revised tentative timelines so that the customers avoid raising a dispute/ chargeback. Your funds may be temporarily unavailable when a dispute is raised against a transaction. You can also make sure you are following the customer service tips that can help prevent disputes.
The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.
1 Based on PayPal’s analysis of internal data of all PayPal and PayPal Invoicing active customers and volume from December 2018 – November 2019.