Cash is king! Without healthy cash flow, your revenue and profitability mean little. Unhealthy cash flow negatively impacts daily operations and curbs expansion plans. It’s the pulse of every business; if it stops pumping, it comes to an end. Thankfully, there are measures you can take to improve your cash flow.
1. Provide alternative payment options
Except for barter, which we advise you against, there are several payment options you can offer customers. From credit or debit cards, bank transfers to digital wallets, the options can facilitate the timely collection of invoices. Most customers intend to pay, but like you, may wish for alternative payment options to help them balance the books. Make collecting payments a focus of your accounting and financial strategy.
2. Don’t be overly generous
Some small businesses bring the burden of unhealthy cash flow upon themselves. What do we mean? They allow longer payment terms to all customers, regardless of their purchase volume, frequency or credit history. It may position you as customer-centric, but if you can’t pay your own bills, you can’t implement other customer-centric actions. Discuss payment terms at the start of a relationship, and then at regular intervals thereafter to find a plan that works for both parties.
3. Match payables to receivables
It’s basic mathematics. If your payables are greater than your receivables, an imbalance occurs. When your payment term to suppliers is shorter than what you’ve offered customers, expect negative cash flow, unless you have healthy reserves. Even if you do, they should not be tapped into for daily operations. Rather, they should be saved for a rainy day or for reinvestment purposes.
4. Automate
Fortunately, there are apps or software to help you with cash flow forecasts and management. By showing your accounts in real-time, you can keep track of your cash flow to ensure your business remains healthy and create forecasts that can be used to win extra investment.
As a small business, one of the pillars of your business strategy is to stay cash flow positive. Even to the trained accountant running his/her own firm, cash flow management can be emotionally draining. Connect with us to learn more about cash flow forecasts and management.
