Everyone says that a man with money is a strong man, and we all know that’s true. You cannot have a successful business person without a suitable cash flow. If this secret is so well known, why are so many struggling businesses? When running the daily aspects of a business, these kind of things, money aspects, are not so clear. We will present you 7 tips to help you improve your income.
- Cash and Carry. Try to build a business based on cash and carry system and stay far away from worries about receivables. This is the best business plan, where customers “pay when they buy” leaving you only with the money. Collecting money takes a lot of your time, that’s why you are almost obligated to come with new options of paying. Set your rules from the start of your business, so your partners and clients will know what you want from them.
- Collect receivables in a very strict way. Don’t let the customers pay you when they remember, go and collect your money in time. To be a good administrator of your business means to have a successful business, to create and apply a set of collecting rules. Longer wait for receivables, harder becomes collecting them. You don’t need a rude attitude to collect your cash; all it takes is a strong voice behind a stronger man. A very useful thing to do is to establish a collecting date after which you should send out a follow-up statement within 10 to 30 days from the established date. Each business has its own opinions about the perfect time. You should not send follow-up statements sooner than 10 days from the established date. Payment may be delayed by the mail, but no longer than 30 days. If you don’t receive the payment within a 45 – 60 days term, you should notice your customer through a phone call. Accounts that go past a 90-day term should be taken to the next step, of collections with a method you established for this situation. Because time is money, every day that passes you’re collecting term ads more costs for your business.
- Receivables Funding. Apply a program that involves accounts receivable funding. Factoring of accounts receivable it’s a very good way to keep the cash flowing. Factoring programs are very used by businesses that work with government agencies. If your clients are small businesses or individuals you may find it more difficult to apply an accounts receivable funding program because there are more risks to assume.
- Suppliers. Negotiate terms with your supplier to help delay the outflow of cash payments. Usually, you can delay the payment until the end of the month or even up to 60 days. This allows you a little advantage of working with their money on your projects. Also, this delay will end (hopefully) just when your clients pay, so you can pay forward to your vendors. Some companies prefer the route of forwarding, giving you the opportunity to increase your offers without having to invest large amounts of money in more products.
- Deposits of customers. Have your customers pay a deposit before starting your work. This will help you cover the first costs of the project. More and more companies use this method of funding. It reduces the risks of nonpayment because you already have some upfront money.
- Permanent credit limit. Implement a credit account through a lender to help you keep a floating line of your cash. Especially if the sum of savings form prompt pay discounts is bigger then the financing charge of the lender is smaller then the suppliers charge for late payment.
- Save funds. Create a “hard time” funding source. Most businesses have ups and downs in their activities and efficient cash management can be quite difficult. Put some money away during your top times to help you in harsh times. We all know this sounds a little bit hard, but it’s very easy, take a percentage of your monthly earnings and put it in a savings account.
You may find all of these 7 tips useful for your business, or just 1 or 2, but remember that anything you do to improve your cash flow will raise your business. The worst thing you can do is sit back and hope for the best. See all those “CLOSED” signs in the shop windows? They hoped and they lost. Be smart, do your best and keep your business at a pro level.
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