In the current economic climate, difficulties with cash flow are quite frequent as customers take longer to pay their bills and banks tighten credit facilities.
Be always looking for ways for maintaining a positive cash flow in your business. Proper advance planning and proactivity is absolutely essential.
Manage Costs
In protecting your bottom line, you not only need to focus on increasing your income, you also need to reduce your expenses. The key to achieving a positive cash flow is to understand your costs and their payment dates and review these carefully at least on a monthly basis if not weekly or daily. This constant monitoring of your cash outgoings will be rewarded and should lower your stress levels!
Manage Debtors Actively
Make a detailed spreadsheet of debtors to identify the clients who owe money and the length of time they have been a debtor. Consider introducing other options to help them pay – standing orders, direct debit, credit card, installment arrangements.
Encourage Repeat Business
Encourage customers to come back to you again and again. Consider offering loyalty programs, special offers and so forth.
Suppliers
Source other suppliers who might give you a better deal. Many suppliers will require you to pay immediately for your orders. Once you’ve established a good relationship, ask for credit terms. Getting 30 days credit can make a big difference. In addition, ask for an early payment discount to save you some money when you do pay in advance. The most important aspect is to make sure your customers pay you before your own bills are due.
Cash flow is one of, if not, the most important aspects of a healthy business so give it the management time regularly required to get it right. And question in advance whether or not you must incur any and all expenditures. By not incurring a cost you avoid a cash outflow!
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