Cash flow is essential because, without it, a company simply can’t operate. Here’s a striking fact: poor cash flow is a top reason that many small businesses fail. Managing solid cash flow requires good management practices and securing funds from loans and other financing solutions.
20 Tips to Manage and Increase Small Business Cash Flow
Here are 20 tips to manage and increase small business cash flow—the lifeblood of every business:
Obtain cash more quickly by immediately invoicing customers and requiring prompt payments. For larger projects or custom orders, it is appropriate to require an upfront deposit.
Use variable price increases for customers who want more time to pay.
Create and share a documented payment policy with all customers citing the recourses for late payments or failure to pay.
Make the customer payment process as easy and flexible as possible.
Use collections when necessary.
Earn interest by keeping cash in high-interest-earning bank accounts.
Use cash-back business credit cards for business expenses.
Pay employees by direct deposit to avoid the cost of processing and issuing checks.
Pay employees regularly but less-frequently using a bi-monthly schedule.
Delay major purchases as long as reasonably possible. And, where possible, make repairs rather than replacing equipment.
Use outsourced services instead of hiring more employees.
In the early stages of a business, use free software.
Find ways to pay in trade.
Negotiate favorable vendor payment terms.
Delay vendor payments when possible.
Avoid long-term investments.
Forecast revenues and expenses accurately.
Use financial statements effectively.
Build and preserve good credit.
Obtain outside financing to help build cash flow.
Seek Expert Financial Assistance
Contact First Source Capital, based in Wakefield, MA for more than 50 financial products and solutions for businesses of all sizes. Our commercial finance options can give new business owners the capital they need to thrive and grow. Our team of trained financial professionals is ready to assist you.