Running a business of any kind — whether it’s a large or small, retail or service — follows the same steps to success. One of these steps involves managing your money by tracking and improving your free cash flow —, then here are some ways to improve your cash flow:
Remember Overall Goal – Increase inflow and decrease outflow
Perform a cash flow analysis
A cash flow analysis makes it simple to identify any available cash on hand and patterns that may be keeping you from improving your cash flow. It reveals where your business cash is coming from and where that cash is going..
Lease Don’t Buy
Buying equipment outright may save you money over time, but if it’s saving at the expense of tying up much-needed cash that can be used to enhance your business efficiency and daily operations, then it may not be worthwhile. Instead, consider leasing your equipment. Leasing equipment provides you with the advantage of keeping more cash on hand while maintaining business productivity.
Screen your customers
Run credit checks on your customer(s) before accepting them or allowing payment terms, this will reduce the risk of delayed (or no) payment or bad debt.
Make it easy for people to pay you
Offer a credit card – (Visa, Mastercard, Amex) facility in addition to Electronic Funds Transfer (“EFT”) facilities and Include it in your order form or invoice. Many clients will elect to pay by credit card to gain access to card loyalty programs.
Don’t pay suppliers early – Pay Suppliers on time
Negotiate better payment terms with suppliers. To get enough time to collect your accounts receivables, negotiate better payment terms with your suppliers. Go for the maximum time you are allowed, which usually range from 60 to 90 days. These extra days will give you additional time to collect your accounts receivables. Don’t pay them early, use them as your bank, they have been good enough to extend you credit (interest free) by giving you the extra time to pay so use it.
Review your prices
Review your pricing model to understand whether incoming revenue is still sufficient to cover all business expenses, (including any bank charges, interest, holding or invoice financing costs) support business growth and still leave you with a decent profit
Always chase up late payments in a timely manner
The longer you wait, the harder it is to get paid. Sending customers reminders are great. There are many cloud based and accounting solutions that can automate this process, but follow it up with a phone call can help put the payment at the top of your customer’s priority list Be professional but firm – it’s a business issue, it’s not personal
Identify cash flow solution in advance
Plan ahead by securing a funding solution that your business can utilise on a rainy day. We all know of banks as our traditional source of funding but they can sometimes be slow and restrictive. The advancement of financial technology has brought about innovative alternative finance companies providing new funding options like crowdfunding, peer-to-peer lending and invoice financing. Cashflow Recovery is one such example providing flexible solutions from a panel of Lenders to help businesses deal with unpredictable cash flow.
Have a line of credit or immediate working capital
When your business is short on cash, a line of credit can be a lifesaver. (Note: A credit card facility is not a line of credit.) Arrange to have a line of credit or short notice working capital loan in advance of a shortfall. It’ll help you keep your business running as you work to increase sales.
Use Invoice Finance to pull forward Cashflow
If you let debts go unpaid, you’ll risk running out of cash. If you want to get your payments faster, invoice financing is a way for businesses to borrow money against the amounts due from customers. Invoice financing (debtor finance or cashflow finance) helps businesses improve cash flow, pay employees and suppliers, and reinvest in operations and growth earlier than they could if they had to wait until their customers paid them. Businesses pay a percentage of the invoice amount to the lender as a fee for borrowing the money. Invoice financing can solve problems associated with customers taking a long time to pay and difficulties obtaining other types of business credit.
Improving your cash flow is vital to stay liquid and to stay in business. That’s why it’s important to take a look at your cash flow by performing a cash flow analysis to assess your activities. It’s equally vital to utilise modern financing, employ payment technology and flexible options to drive cash flow enhancement activities. By employing these cash flow enhancement tips, your business will be on its way to success.
For More Information about Cashflow solutions to help your business contact:
Suite 14/19-21 Outram St
West Perth WA 6005
Ph. 1300 885 244
Westbridge Securities Pty Ltd t/a Cashflow Recovery Authorised Credit Representative 492799 of Australian Credit License non 377294