Cash-flow is the lifeblood of any small-to-medium business, the fuel that keeps your business’ engine running. At the end of the day, it doesn’t matter how profitable your business is or how many sales you make if you don’t have cash. Business owners need to manage their cash-flow correctly in order to keep their businesses going and growing.
Follow these 5 tips to improve your business cash-flow and grow your business:
1. Limit your customer payment terms
Instead of allowing 30 or 60-day payment terms, request full payment upon job or project completion. This will help you maintain a steady flow of cash into your business and should help close any gaps.
2. Negotiate vendor payment terms
Negotiate payment terms with your vendors, extending payment to 30 days or more, so you have time to invoice your own customers and receive their payments before paying vendor bills.
3. Set up a collection process
Ensure that you have a firm collection process set up and stick by it. Every payment delay by a customer is a loss of cash for you. If you’re having problems collecting, hire the services of a payment collection service.
4. Use invoice factoring services
A preferred alternative to employing the services of a collection service is to apply for invoice factoring. Many small business owners have a personal relationship with their customers, and would rather not jeopardize this relationship by employing hard-core tactics. It’s also useful for businesses that cannot limit payment terms for their customers. With invoice factoring, you get an immediate cash advance on your outstanding customer invoices.
5. Get a business loan
Many small business owners find it useful to get a business loan or have a line of credit available, which they can access whenever cash-flow gets low. With a line of credit, you get approved for a set amount, the funds become available, but you only pay interest on the amount you actually use. You can draw on your credit line whenever you need the money.
Don’t leave your business cash-flow to chance. Manage your cash-flow correctly and you’ll give your business the best shot at succeeding.