It probably won’t come as a surprise that managing cash flow is perhaps the biggest concern small businesses and entrepreneurs face daily. Regardless of the size of the company, or where it is along its stage of life, every business owner is burdened by the time consuming issue of cash flow management.
Given the state of today’s economy, with customers extending credit terms and taking longer and longer to pay, this is likely the most pressing concern for small business owners everywhere. However, there are solutions to managing cash flow. There are ways to mitigate its impact and free up valuable time so that small business owners can get back to concentrating on what they do best. These approaches are simple, straightforward and can be used in both good and bad times. In fact, they become one of the most important aspects of growing a business and increasing gross profit. Interested in knowing what these approaches are?
Pursue Prepaid Customer Accounts with Bad Credit
Every day an invoice goes unpaid is a direct cost to the business owner. Since most businesses use business credit lines or loans to finance their day to day operations, they must pay a yearly interest rate to borrow that money.
When customers take too long to pay, not only is it difficult on cash flow, but there’s a cost to it as well. One of the best ways to alleviate that cost is to get paid faster. The easiest way to accomplish this is by selling product to bad credit accounts who must prepay before receiving product. Prepaid customer accounts are excellent sources to alleviate cash flow as they are rarely pursued by the competition.
Incentivize Early Payments with Discounts
Don’t just go after those customers who must prepay, use incentives with the best customers to get them to pay sooner. Provide discounts and prompt payment incentives across all customer accounts. This will incentivize these customers to pay sooner and help in managing cash flow.
Negotiate Discounts for Early Payments with Vendors
Be sure to secure discounts for prompt payments on your own invoices. When cash flow isn’t a concern, make sure to benefit from the savings accrued by paying your vendors sooner. It will help over time and keep more money inside your business. Managing cash flow is really about saving money when possible and this is an excellent way to keep more of your company’s money.
Managing a company’s cash flow can not only be frustrating, but a drain on resources as well. However, these simple approaches not only reduce its impact, but point the way to additional savings. They are used by a number of companies who view them as best business practices.