20 Tips to Improve Small Business Cash Flow
Managing cash flow can be challlenging for many startups and small businesses
. Cash flow issues arise for many different reasons and can have a significant impact on the health of a business. Below are 20 tips to help improve cash flow in the short term:Receivables/Customers
Invoice as soon as sale is completed.
Perform a credit check for new customers to avoid bad debts
Ask for a deposit or retainer if warranted by size and timing of job.
Provide for discounts for prompt payment e.g. 2% for 10 days.
Follow up with delinquent customers frequently
Charge interest on late payments.
Accept credit cards for payment, if necessary
Factor receivables i.e. sell/finance your receivables for a fee
Suppliers/Expenses
Take advantage of discounts offered for early payment.
If no discounts are offered, pay suppliers only when invoice is due
Ask suppliers if payment terms can be extended.
Where possible, make payments by credit card
Ensure that credit card and loan payments are made on time to avoid interest and penalties
Review current expenses to see what can be reduced. Easy savings can often be found in office supplies and subscriptions.
Compare prices and switch to cheaper suppliers where possible
Other
Sell excess inventory to generate cash.
Review inventory on hand to determine if it can be reduced
Reduce or eliminate salary to owner until cash flow problems are resolved
Setup a line of credit with your bank
Prepare a budget to determine your short and long term cash needs.
In order to take advantage of these recommendations, it is imperative to have accounting systems and processes that are reliable and up to date as this allows for accurate receivables, payables and inventory data. Additionally a good accounting infrastructure will allow you to know what your cash position is at any given time and supplies the basis for creating budgets and forecasts which will contribute to a more efficient and cost effective business.
20 Tips to Improve Small Business Cash Flow
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