The lifeblood of any small business is cash flow! If you are currently experiencing cash flow bottlenecks or are simply looking for more efficient operational procedures, consider the concepts outlined below. Once implemented, these strategies can improve your business’s regular cash flow.
1. Promptly Send Online Invoices – Rather than wait until set dates during the month to send invoices to customers, bill promptly using online invoicing; once services have been rendered or products have been sold/shipped. If your business works on an hourly rate, establish online billing routines twice per month to ensure that you have regular cash flow coming into your business.
2. Request Partial Payments – For many businesses, partial payments can ensure that you have the capital you need to secure raw materials needed to complete orders. For example, you could request 1/3 be collected upon job acceptance, 1/3 once work on the project commences and the remaining 1/3 upon successful completion of the job. This is a standard business practice and will help provide your organization with more regular cash flow.
3. Offer Quick Payment Incentives – Consider offering a discount for online invoices that are paid early. For example, you could offer 2-3% off of the invoice’s total for payment received within 10-15 days of the invoice date. Consider online billing platforms to provide your customers with an easy payment option.
4. Aggressively Collect Receivables – It is an all too common scenario for small businesses to have a wealth of capital caught up in their accounts receivables. Track late payments using online invoicing software and in particular, pay attention to clients who seem to regularly pay invoices late. Consider charging a premium for clients with regular late payments as an incentive to speed up the payment process. Send a collections letter initially to late clients and if this isn’t successful, consider turning over their accounts to a collections agency.
5. Avoid Early Bill Payment – Hold onto your business’s critical capital as long as possible; don’t pay bills as they come in, but rather pay them near their actual due dates. When possible, establish automatic payment arrangements online to ensure that you never miss a critical due date. Paying your bills on time rather than early will keep more cash in your business’s operational accounts where it is needed.
Successful implementation of the above strategies will ensure that not only you keep more capital in your business’s operational coiffeurs, but that you collect cash from paying customers more efficiently and effectively.