Small business owners often find it difficult managing their cash flow initially. Problems can also occur with well established and profitable companies if their finances, operations or investing activities are not streamlined. The management of it has become more critical than ever. Maximisation of cash flow can help your company receive profits faster and meet targets in a short time frame.
Here are four strategies for small businesses to improve their cash flow:
Right from the beginning of your first big sale, make sure to negotiate for quick payment terms. Make it clear to your clients that late payments are not acceptable. If your clients are delaying your payments, that will for sure put you into a negative cash flow shortage. Furthermore, you can ask them for partial deposits or consider offering discounts to clients if they make early payments. In this way they will be encouraged to pay you timely.
Make sure to reduce your spending on non-essential items. This can include gifts for clients, office space that is not used, entertainment or staff amenities. Also, the best way is to scrutinise your expenses and look out how to free up your cash flow.
Basically, cash flow forecast is the breakdown of your monthly/weekly/quarterly business’s incomes and outgoings. This will help you analyse where you will have a surplus or deficit of cash in your business account. This will help you manage your company’s finances and plan when to pay expenses.
There might be a case where a customer doesn’t want to pay you in cash, as an alternative make sure to conduct a credit check, especially before you sign them up. If the client has poor credit, you can safely assume that you won’t be receiving payments timely.
