As a small business owner, you face several daily problems, from meeting production levels and deadlines to increasing sales, keeping staff happy and motivated, and ensuring that your customers are satisfied. Proper cash flow management can solve most of these problems, and it’s why it is considered your business bloodline. Your enterprise is more likely to fail if you don’t address your cash flow issues. Here are four cash flow management tips you should consider.
- Strategically pay your bills
Instead of settling all your bills at once, consider spreading your payments and extending payables as much as possible. Paying up all your bills on time can deplete your funds, and failure to pay could also threaten your supplier relationships. Therefore, it is advisable to go through your bills, sort them in order of priority, and schedule payment dates to take care of the most pressing ones like payroll and rent. You can make payments on the less important and flexible ones later. However, ensure timely payments to avoid any penalties and check if there are any discounts for early payment.
- Lean operation
Who wouldn’t want the best office settings, the biggest working teams, or the latest tools? These are useful business resources, but it is best to resist the temptation and keep a lean operation. Your superior product and service delivery attracts customers, and not necessarily how your office looks. So you want to utilize your available resources wisely rather than stretching your finances on new equipment or hiring new people. If you have to seek outside funding, only go for the least amount possible to meet your objective. Taking more loans than you can handle can cause you to default and go out of business.
- Grow connections with lenders
It can be challenging for small businesses to borrow money or persuade investors to put extra money into a new business. For instance, lenders such as bankers are least interested in financing businesses that are in dire difficulties since they want to protect their funds. However, growing your connections in the financial sector will be useful when you need it. Building connections with lenders can enable you to access future loan commitments.
- Use tech to make and receive payments
Aside from using electronic fund transfer to pay for invoices, online payments are a faster way to collect receivables. Technology is useful for tracking and monitoring your financial position every given time. For instance, technologies such as NFTs allow you to quickly generate cash flow to grow and fund your small business. Positive cash flow is crucial for your business’s short- and long-term financial success. You want to track your spending to maximize your cash flow, swiftly collect payments and utilize services that streamline your finance management. Learning ways to use NFTs to grow and fund your business can be useful.
- Train customers and carefully manage credit policies
As a business owner, your objective is to receive money for your products and services before or after footing the cost of creating or delivering them. Payment upon delivery is ideal, but this is not always attainable. Send an invoice to your clients on delivery day, noting that you expect payment upon receipt of the invoice. Avoid creating the impression that they can wait till the month end to make payment. If possible, consider adding interest charges when payments are made after a particular date. Inform customers about your intention to commence action if payment has not been met. Here are a few techniques to collect payments if you have credit policies. First, monitor your accounts for late-paying clients and introduce a cash-on-delivery policy for repeat offenders. Secondly, send bills, confirm receipt, and follow up on late payments as soon as possible. You can also perform a credit check before granting credit to new consumers
- Select the right payroll cycle
Ensure to structure your payroll according to your income stream and wage legislation. For instance, retail and restaurant businesses can raise funds needed to pay their employees each week since they use each other daily. However, it is not the same for businesses like producers or wholesalers since they do not raise money regularly or have slower income sources. Choosing the wrong payroll cycle can affect your cash flow management. It would be best to keep the cash paid less frequently, say bi-monthly or monthly if relevant wage and hour legislation allows it.
Several small businesses make cash flow accounting mistakes by over forecasting their sales, poor bill tracking, and incorrect resource allocation or failure to plan during startup. Consider the above tips to improve every area of your business affected by money.