Do you ever wish you could turn your cash flow from a stagnant, muddy pool to a crystal clear rivulet? That you always knew exactly how much would be coming in to your business, and when? That you could perfectly anticipate the right moment to make payments or hold off on an investment? You’ve probably been told a hundred times before that there’s no crystal ball when it comes to anticipating exactly when the money will come in, and that’s true. But we do have some tips to unclog the waterways and get things flowing smoothly and quickly. Here are a few ways to help your company improve cash flow.
Improve cash flow by paying vendors with a credit card.
Improve cash flow by timing your credit card payments right. Doing this cleverly can stretch your time span over which to pay bills to 50 days: that is, if you’re paying your vendors 30 days after you are invoiced, and pay your credit card 20 days after you incur the cost. It means paying some attention to the calendar, but this could definitely be worth freeing up cash while simultaneously allowing you to avoid any interest charges for the better part of two months.
Improve cash flow by accepting credit card payments from customers.
If you aren’t currently accepting payments from credit cards, consider it. Businessknowhow.com makes the following observation. “Yes, you’ll pay a credit card processing fee on each transaction, (often 2 to 3 percent of the sale for online and mail order sales) and possibly a per-transaction fee and a small monthly fee) but you’ll get your cash faster. And, that can let you pay your bills on time, saving you more in interest fees you’d have to pay on loans and credit cards than you’ll lose in credit card processing fees.”
If your business relies on many small transactions to keep the cash flowing in, this might be a very real consideration. Along with this, cell-phone enabled payments like Snap Scan allow for immediate payment, don’t require a point-of-sale device and can further improve your cash flow.
Improve cash flow by paying suppliers on different schedules.
You might need to pay your suppliers within 30 days, but that month doesn’t need to begin on the 1st and end on the 31st. Be mindful of staggering payments with your regular or big suppliers. Some payment months can begin in the middle of the month, others at the end. Negotiate payment terms with key suppliers. Companies that are reliant on your business will likely be willing to be paid over a long time period. Similarly, take advantage of new entrants into the market who are looking to establish key relationships. If you are one of the company’s first customers, they will likely be open to a more general payment programme.
Improve cash flow by being discerning about new customers.
How do you avoid a scenario where you’re unable to pay salaries and rent on time because the massive payment from “that” client that you’ve been waiting on for ten days still hasn’t come through? If you’re taking on a new large customer – on whom you will be heavily reliant for income — run a credit check first. If their credit record is not squeaky clean, or they appear to be habitually late payers, put two things in place.
Negotiate a cash-on-delivery policy.
Do this upfront and be candid about why. Your customer can’t object to you hedging your bets against risk. Don’t plan on them paying on time. It would be naïve to assume that habitually late payers will magically start to pay on time for your company, even if you have negotiated some stiff terms upfront. Plan around them paying late. If your company can’t afford it, then you can’t afford to do business with this customer.
There are several ways to improve cash flow, each of which is more suited to some businesses than others. If you are looking to get things flowing more smoothly, you might find some of these suggestions useful, or you might find that only one or two are applicable. The most straightforward way to ensure that you are optimizing your situation is by bringing on an expert to conduct a cash flow analysis and make recommendations tailored to the needs of your business. Contact The Finance Team to arrange for a finance professional to give your company this assistance for the period of time that you need it and no more.
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