Managing cash flow is the lifeblood of your business. After all, your business depends on the cash flowing in to pay for those expenses needed to operate your business. Today, I will discuss 12 ways to improve cash flow which can help you encourage incoming payments, delay outlays of cash and stay on top of everything in between – like payments, late fees, and billing cycles.
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Let’s start with the first thing that you can do to improve your cash flow. Which is to invoice immediately. Do not wait until next week or the end of the month to submit your invoices. When you delay sending your invoice it sends the message to your clients that they can wait to send their payment.
Get It in Writing.
The second thing that you can do to help your cash flow is to set clear payment terms and expectations in your initial customer agreements. Spell out your terms on every invoice.
Always Include a Specific Due Date.
Although you may think that the term “Due upon receipt” is clear it can be ambiguous. It is better to put “payment due within 30 days of the bill date” as this clearly communicates your expectations.
Use Electronic Billing.
Electronic billing is fast, and your customers are more likely to respond quicker when they can pay instantly. Deposits can be made directly to your account saving on the cost of paper and stamps.
Charge Late fees.
Institute late fees as a way to prompt clients to pay. If you do not charge late fees your clients may not pay the bill until it is convenient for them.
Offer a Incentive for Early Payment.
You can always give your customers a good reason to pay sooner than they normally would. For example, a 1-2% discount for payments received within two weeks of the bill date.
Slow Down Paying Your Bills
You can hold off on paying your bills until they are due. If you are presented with a worthwhile incentive for early pay, then take advantage of it. Otherwise, set your target for a day or two before the due date. If you pay your bills electronically you can schedule in advance.
Get a CPA.
A CPA can help guide you toward your financial goals and offer corrective action if you begin to go off course. They can also help you with your taxes by taking advantage of deductions that can benefit your business and help improve your cash flow.
Get a Line of Credit.
The best time to get a Line of Credit is when you do not need one. A line of credit can solve an occasional cash flow problem as you can access it when needed.
Sell Your Invoices
If you cash flow problem is urgent you can always sell your invoices. The invoices that you have for work already done can be sold to a factoring company. They will charge a small fee and they will pay you 90-99# of the original invoice amount upfront. It is a great option if you have to wait 30, 60 or 90 days for payment on your invoices.
Take advantaged of periodic payment programs that are fee free. For example, small businesses with workers’ compensation coverage can pay their premiums every time their payroll is run. Payments are based on actual payroll eliminating the need for a large down payment and best of all carry no installment charges.
Every Week Check Out Your Cash Flow Status
On a weekly basis you should check off what has been paid, what is coming due and what is late. Send reminder notices when needed and don’t forget to tack on your late fee. I have even called client’s and reminded them about the invoice. For some reason the invoices were going into their junk email!
As an entrepreneur you need to stay on top of your cashflow. By instituting a few of these suggestions should help get you started on the right path.
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