Gradually managing cash flow makes it possible for a company to have the right amount of cash at any particular time. Having too much cash on hand means capital is sitting idle. But a lack of available money can trip up an otherwise expanding business. Within this article we’ve put together the top tips business pros had to offer to help you improve your business’s cash flow management.
1. Only Borrow If There’s Long-Term Benefits
Barbara Corcoran, Entrepreneur & Shark Tank Judge
Borrowing money may be a sound business decision when done strategically and with discipline. But borrowing money without even thinking through the consequences can lead to business catastrophe. Consider exactly how you anticipate your company to benefit from the borrowed cash over the long-term and how likely you are to really get the anticipated benefits. See more small business information from Barbara Corcoran here.
2. Plan How to Use the Capital Before Borrowing
Ty Kiisel, Editor at OnDeck Capital
Capital may be leveraged to help a business grow or flourish, but it won’t block you from crashing. You can use a short term business loan or business line of credit to bridge short term cash flow problems, but it might cripple your business with much more debt if you don’t possess a definite ROI or improvement program. Ensure that you plan out how the capital will aid your business before you take on the extra capital.
3. Turn Unpaid Invoices to Cash
Jeff White, Finance Analyst at Fit Small Business
It is possible to get money immediately for all outstanding invoices due from the next 90 days to fill a cash flow gap while you wait on your client to pay. This can be named Invoice Financing, or AR Lending, and you’re able to find a line of credit for the value of your invoices from a company like Fundbox. You can learn more by checking out our guide to invoice financing.
4. Track Everything & Maintain Your Information Accessible
Christal Bemont, SVP at Concur
Concur recently discovered that small businesses receive a mean of six replicate invoices totaling more than $12,000 monthly. If you’re not monitoring these carefully, it would be easy to make duplicate payments. Tracking it all will help you head off errors and oversights, and maintaining all that data in one location will help your entire staff be on the same page.
5. Get Paid Faster with Mobile Payment Solutions
About the American Express OpenForum, you can learn about 12 extra cash flow hints. One of those tips is to provide mobile payment solutions to your clients. This is particularly good if you sell products or offers services in your client’s’ home or office. You can forget about bills and instead get paid right on the spot with mobile apps that can use a telephone or tablet computer to swipe debit and credit cards.
6. Have a Business Line of Credit on Hand
Caron Beasley, Contributor at the Small Business Administration
Using a business line of credit will provide you a cushion of available funds to use when it is necessary. The best part is you don’t have to pay for any portion you’re not borrowing. You need to apply for a LOC before you believe that might need it, because it can work as an emergency credit line to use as you please.
7. Don’t Mistake Gain for Money Flow
Michael Burdick, CEO of Paro
High profits for a specific month do not automatically mean that you have the money in hand to pay your expenses when they are expected. Make sure you set clear, efficient, and quick processes to collect customer payments, and take advantage of any flexibility your suppliers or lenders provide you with. Maximize the utilization of your profits to get the money when you need it.
8. Implement a Cash Flow Budget
William Edwards, Iowa State University
A cash flow budget is an estimate of all cash receipts and all cash expenditures that are predicted to occur during a set time period. A cash flow budget forces you to think through your plans for the calendar year, and it forces you to check those plans to see whether they have a high probability of succeeding. If not, you may change your strategy before it fails.
9. Build a Cash Reserve
It’s possible to use a cash book or business line of credit for you through the hard times of common cash flow gaps. You can use the money to pay off instant debts which pile up from completing the work you are awaiting payment for, or even to take on additional work without waiting for repayment of previously completed jobs.
10. Credit Cards Can Simplify Expense Tracking
Carson Yarbrough, Consumer Insights Specialist in Offers.com
Company credit cards can be a fantastic help for people who are about to begin a new company since they may be used to track expenses daily one, and supply a lot of chances, bonuses and cash back benefits for your business. Not only conduct business credit cards give you net-30 terms, but they could also plugin to your accounting applications and also can keep your expenses into one account. This can streamline your accounts payable procedure.
11. Be Active in Forecasting Your Outcomes
Finance professionals utilize calling to help them properly manage the cash of a organization. You can identify financial trends utilizing digital tools, and you could have a very clear picture about where your company stands at the industry. All this can result in better decisionmaking, which could impact your money flow in a favorable way.
12. Share Your Money Flow Plan With Your Team
Troy Hazard, Creator of 12 Firms, President of the Entrepreneurs’ Organization, and Writer of Future-Proofing Your Small Business
Manage your cash flow by getting into a fiscal rhythm on your company with weekly/monthly/quarterly cash flow preparation. Monthly performance indicators and annual preparation events can make everyone on the staff more aware of the money going out the door, and restrict unnecessary expenditures. Do not keep your staff in the dark, or your risk mismanaging the cash you do have.
13. Offer a Discount for Fast Payment
1 option to raising cash flow would be to provide your customers discounts if they pay early. While this practice may impact your profit margin, it might help your management of cash flow by incentivizing clients to make payments sooner than charging cycles normally require. Your company may also make the most of this with suppliers and others that you owe.
14. Consider Accepting Electronic Payments
Matt Baker, VP of Strategy at FreshBooks
Consider accepting electronic payments. Does this make you look more professional to your clients, but FreshBooks data shows digital payments are made 8 times faster than traditional methods. That’s a huge deal when you don’t now receive normal payments from your customers.
15. Use Technology to Create a Lean Business
Neil Mclaren, Founder of Vaping.com
Technology makes it possible for businesses to operate’lean’ and to keep their expenses as low as possible. Assess each operational procedure within your business and determine precisely how much it costs your business each month. Look for technological solutions that permit you to execute these tasks more economical, and implement them as quickly as possible!
16. Diversify Your Product Offerings
Kabbage.com
You can diversify what products you offer to boost your sales and assist with cash flow. Should you tie these new offerings to your other products then you might get additional cash with current customers, and attract new clients that may become interested in your main product as well. This is a long term solution, and won’t assist with a direct cash flow gap.
17. Require Deposits on Big Orders
Michael Lewis, Writer in Money Crashers
If you’re working on a large, or habit, purchase then require a deposit (or deposit) of 50%+ up front. This will prevent you from spending a great deal of cash to satisfy the order and not being able to be paid in your work for up to 90 days. With no deposit, you risk your customer negotiating a reduced payment once you deliver.
18. Handle Payment Expectations With Clients
Richard Gertler, Business Attorney
Invite clients that you expect to be compensated on a timely basis sets the stage for them to pay punctually. Phone call reminders in addition to written reminders reinforces that message. Using a credit card authorization on file that allows for charging of the customer’s or client’s credit card on past due bills helps eliminate the effort and time of collection.
19. Outsource Cost Effective Work Spots
Marty Spargo, Co-Founder of REIZE
Outsource as far as possible to areas that can do the work more cost effectively. When outsourcing work, make certain there is somebody in charge of the person or team that you’re outsourcing to that will take ownership of the quality of the output. And be sure person understands how to be frugal.
20. Negotiate Different Payment trademarks
Ryan Himmel, Financial Partnerships Lead, Americas at Xero
If your cash flow is causing difficulties at particular times of the year or year, then you may be able to improve the problem without dramatic changes. Consider negotiating different payment dates to your providers to better align inflows with outflows. This could spread out your cash flow and provide you the breathing room you need.
21. Define All Cash Outflows
Catherine Wood, Creator of Unbounded Potential
Begin by understanding where each single parcel of income is coming from every month, how much it is, and once you’re able to expect it. Then write down an exact definition of what each cash outflow is (for example, what precise expenses are categorized as”training”).When you determine how you are able to make the money work, you become prone to start taking action and removing non-essentials.
22. Know Your Burn Rate
Rebecca Kennedy, Contributor in MP Star Financial
Understand your burn speed, which can be your negative money flow. Money flow tells you how long a company could stay in business without earnings or additional funds. To calculate, you have to incorporate all of your monthly operating costs. This way you’ll understand how much the company is spending on a monthly basis, and whatever’s not vital can be cut. It is possible to handle each of these amounts through an accounting program, like Quickbooks.
23. Require Payment First, or Invoice Faster
Bob Shoyhet, Chief Financial Officer
If you end up struggling with cash flow then you might want to employ a payment first policy that makes your customers pay before you supply solutions. If you’re not eager to have such a rigorous policy, then try invoicing your clients quicker. The faster you can get them a statement, the quicker they have the potential to pay it.
24. Repair Negative Money Flow Trends
25. Have a Weekly Cash Flow Report
Steven Muntean, CEO of S3 Safety
The best cash flow management tool that my businesses utilize is a simple yet quite effective Microsoft Excel formatted Weekly Cash Flow Report. The Weekly Cash Flow Report focuses on three main Key Performance Indicators (KPI’s). The first is your actual beginning of period cash equilibrium, the next is your projected Accounts Receivable (AR), and third is Accounts Payable (AP) to help predict expenses.
BONUS: Add Discipline for Your Invoicing and Payment Systems
Ian Fitz-Harris, Strategic Development Director in URICA
Chasing outstanding bills burns time. If you don’t have the procedures in place to make certain your customers pay in time, and also the discipline to apply these procedures, your money flow might just dry up. Send your invoices quickly. Place reminder systems in place so that you chase outstanding invoices the minute they are overdue. Be thorough — it’ll save time. You might also consider adapting your conditions so that your customers incur a monetary penalty for late payment. Alternatively, offer a discount if they pay premature.
BONUS: Extend Your Payables
Quickbooks.Intuit.com
You may typically extend a lot of your payables. You might acquire net-30 or even net-60 terms from your suppliers, in the event that you just ask. If you currently have terms, then try to extend terms as high as net-90. This may improve your immediate cash flow by stretching when you truly need to make many of your bigger payments.
Over to You
Now that we’ve shared what many industry experts have to say about improving your company’s cash flow, we would love to hear what you think. Do you have resources or tips which may benefit other small business owners? If you need any clarification or have questions about cash flow management feel free to leave those from the comments below.
