Cash flow is an essential part of any business. Without a good cash flow, you’ll have no money to pay yourself and your employees. You also won’t have any money to pay your suppliers! As you can imagine, if you have negative cash flow, your company could end up in financial dire straits.
That’s why it is crucial that you keep on top of your firm’s finances. Are you finding that your cash flow doesn’t seem as good as it once did? Don’t worry. Because today’s handy guide will help you to get things in order again. Take a look at these brilliant tips:
Don’t offer long credit terms
In fact, in an ideal world, it would be better if you got paid upfront for everything! But the ugly truth is that, in business, many of your customers will want some time to pay your invoices. Especially if they owe you four to six-figure sums.
Most companies offer credit terms of 15 or 30 days. But if yours are longer, I urge you to make them shorter if you want to improve your business’s cash flow crisis. There are two main reasons why you need to do this.
First, what happens if some of your clients are notorious late-payers? If you offer 60-day terms, you might need to wait a couple of weeks for payment after “chasing” them! That brings me to reason number two. You will get paid quicker with shorter terms, even taking into account late payers!
Do thorough checks on clients before offering credit terms
It sucks when you have customers that always pay late, doesn’t it? But, did you know that it’s possible to lower the risk of dealing with such clients? For example, you could do credit checks on them before offering a line of credit.
Credit checks can tell you what financial state your customers are in. They can also tell you how likely it is they will pay you on time. If you do a credit check on one customer and many red flags get shown, you know not to offer them any credit facilities!
These days, business credit checks are quick and easy. All you do is type in their name into a credit checking service. You then pay for the report, and you’ll have instant access to their financial details. The reports themselves are inexpensive, so you don’t have to worry about paying lots of money for such a facility.
Doing credit checks on your clients is an excellent way of relieving some of the stress on your company’s cash flow.
Set up payment card facilities
Invoicing your customers is the conventional way of asking them for payment of your goods and services. But more money-savvy businesses are offering debit and credit card payment facilities too.
For instance, let’s say your client needs to make a small, one-off order for some items. Their typical order process might first involve raising a purchase order. And then continuing with the rest of the “purchase to pay” system.
But if a buyer wants to get something sooner, they might skip that process and just try to sneak an order through your business. Such a situation is not uncommon, and it’s a nightmare for both suppliers and customers. Why? Because the client’s accounts department won’t have any record of such a requisition.
If individuals need to place small orders, they can do so by using a debit or credit card for payment. Afterwards, they can claim the purchase through their usual expenses process. And you end up getting paid for your goods and services straight away!
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Lease instead of buy
One of the biggest things to make an impact on your company’s cash flow is when you buy things outright instead of leasing them. In business, it always makes sense to rent equipment, vehicles and machinery. That is, instead of spending anything up to seven-figure sums buying them.
Take your fleet of company cars, for example. They are one of the larger purchases your business will make. If you have many vehicles in your fleet, the cost to buy all those cars will make a significant dent in your firm’s finances.
Instead, the savvy way of maintaining a fleet of cars is to lease them. You get to “rent” them for a period of say three years or so. And then you can obtain new vehicles for you and your workers to use.
Sites like listers.co.uk make it easy to find out what’s on offer and what your business could pay per vehicle. There are scores of leasing companies out there, so it won’t be hard to get the best deal for your money.
Paying for things in instalments instead of in a lump sum will make an enormous difference to the available cash you’ve got in your business.
Offer subscriptions or “continuity” deals to your customers
Of course, the same concept works with your clients too! Does your business sell products or services that have a high value? If so, your customers might prefer to lease or subscribe to those items instead of buying them outright.
Even in the computer software industry you’ll see this happening. Take Adobe, for example. Their design software used to be out of reach for most home and small business users due to their high prices.
But now their products are all offered on a subscription basis. The price you pay each month is affordable, even to those with the tightest of budgets. Also, it encourages more sales for them, and it cuts down on software piracy too.
That’s because people can afford to use the latest versions of the software. Rather than downloading illegal copies that often have malware in them!
Summary
As you can see, there are plenty of ways to increase your company’s cash flow. In fact, I could list some more but I would be here all day writing this blog post! By following some (or all) of the tips listed here, you’ll soon get your company finances back on track.
