For many businesses, the biggest thorn in their side isn’t necessarily lackluster sales, it is cash flow woes. When the money isn’t streaming in when it is supposed to, it becomes harder to tend to every aspect of your business, from marketing to employee salaries.
The good news is, the problem can largely be addressed with a willingness to look at how you are operating now and seeing where tweaks can be made. It is easy to fall into bad habits, keep doing things ‘the way they have always been done’ and to be totally oblivious to easy fixes.
Here are just a few tips to get you started:
Hold Onto Your Cash as Long as You Can
Paying bills as soon as they come can provide a nice psychological boost—it feels good to be financially responsible and to know an expense has been taken care of. But, for the most part, that is really the only benefit. Paying a bill several weeks early as opposed to the due date can eat up cash that could be put to better use right now. The only exception would be if you were getting some nice discounts from vendors for early payment of invoices.
Work Out Payment Terms to Vendors that Gel with Receivables
If you are like many businesses and extending credit to your customers, you know all too well that a sale really isn’t a sale until that invoice gets marked as paid. There are certainly advantages to payment terms, but this is one of the big disadvantages. One of the biggest issues is the money not really coming in when your own invoices are due for the various goods and services you are purchasing for your business. Getting a handle on when that money is coming in can be helpful for setting up due dates for your vendors.
Get On Top of Your Receivables
If you aren’t exactly managing your receivables effectively, you are not alone. This is a big problem for many businesses. You may worry about alienating customers by pursuing late payments. Things get busy and you just don’t realize how much stuff is still outstanding that should have been paid already. There may not be a concrete procedure in place to deal with late payments and collection efforts are haphazard and half-hearted.
If you are having cash flow issues and your receivables are a bit of a mess, you have to fix this, no two ways about it. You can pursue late payments in a way that can maintain relationships—you are owed this money…you have a right to ask for it.
What Can Be Trimmed, Tweaked, Made More Efficient
This aspect of managing cash flow can be a bit more involved as you need to closely examine what you are spending your money on and how much. Are you paying for goods and services you really don’t need right now? Are you getting the best deals? Is there any way to streamline operations? For example, if you use transportation solutions for your business, you might inquire as to whether there are other supply chain solutions available that can save you money along with enhancing your service.
Are you stocking things you really don’t need? Are you paying people to do things that maybe you can do yourself right now?