10 key tips to keep the cash flowing

No matter what kind of business you operate, cash flow is what keeps it going.

Your business may be making sales left and right but, if the money isn’t coming in you will come up short. Not having the cash in hand when you need it can force you to miss out on key investment opportunities, struggle to pay your creditors and even force you to take out loans in order to pay the bills. With the government cracking down on unpaid taxes and debts and other companies becoming more proactive in their approach to cash flow, you may feel you have been left behind.

So how can you avoid these problems? The key is to pay close attention to the way you manage your cash flow and identify where you are falling down so you can make positive change. Here are ten ways you can achieve a healthier cash flow:

1. Stop focusing on profit, instead focus on cash flow:

While you may think a profit is the most important thing in business, this is not always the case. First you need to understand the breakeven point for your business as this will determine your cash flow needs and have a direction to strive for. When you know your breakeven point you can then do everything needed to get your payments coming in faster, allowing you to have enough cash on hand to pay bills easily and focus on improving your business.

2. Review your paperwork:

Are your invoices clear on payment terms and the due date? Do they clearly show customers your payment details?

3. Make accounts receivable top priority:

Put someone trustworthy and responsible in charge of following up on late invoices and payments received – you should always make contact with statements and reminder phones calls then if required enforce the consequences for non-payment.

4. Credit limits and payment incentives:

Be firm on your credit limits and consider new ways of protecting your business by asking new customers to pay cash up front, converting small accounts to cash only (COD) and undertaking credit checks on large customers. To encourage fast and regular payment, set the ground rules and offer customers discounts for paying early. If you incentivise customers to pay you, this reduces your own admin burden too.

5. Use email:

Emailing your customer invoices will not only save you time, it will save you money and make it easier for them to pay faster. Just make sure you confirm the correct contact details with the customer first!

6. Use technology:

The options for using technology to improve your business are endless. Mobile apps, cloud software and new banking technology have the ability to save you time and improve efficiency. Talk to your bank or accountant about your options.

7. Direct debit:

When possible, direct debit is your best option to receive payment for the goods and services you provide. It’s paid on time and requires less effort for both you and your customer.

8. Stop paying bills too early, negotiate your payment terms:

If you pay early, that cash is no longer available to you. If you establish a reputation for consistently making payments to your creditors, they will be more likely to extend the time you have to pay bills. This can reduce your cash flow stress. Just keep an eye on who you are paying and when, don’t get stuck paying late fees.

9. Get rid of unnecessary assets:

If you have plant and equipment items you aren’t using consider selling them. The funds you gain from their sale can be redirected into something more valuable. If you have seasonal stock, look at offering incentives get them flying out the door.

10. Keep some cash in reserve:

If at the end of the day you know your business’ cash flow is tight, it is important you keep some money in your bank account. This extra cash on hand will prove to be very helpful when you need to pay for bills when payments haven’t come in. It may be hard to maintain the money in reserve but it can be very helpful when the need arises.

Keeping cash flowing can be a challenge for many businesses but with strong cash flow you have the opportunity of growing your business and make the most out of the resources you have – so try these tips today to help get the best outcome for your business.