5 ways to get cash flow into your business
In simple terms, your cash flow is a measure of what you’ve got coming in and what you’ve got going out. Most small businesses are having have problems with cash flow, and some of them cannot pay back vendors, make payments on loans, or make payroll because of cash-flow issues.
Outstanding receivables are the cause for many owners.
If your customers are slow payers and you want to prevent all problem this may cause you - here are some tips that help you to manage the cash flow in your business.
1. Understand how money depreciates.
If your customers are delinquent on $5,000 worth of receivables, and you operate at a 20% net profit, you’ll need to bring in $25,000 in new business profits (not revenue) to compensate. That’s a lot of extra work to take on.
To avoid cash flow problem, you must understand how much it damages your business.
2. Set clear payment policies.
Some businessmen are shy to talk about money with clients or don’t know when to talk about it, but I encourage you not to avoid this topic. All is easier than some people think – clients simply don’t know when they should pay if you didn’t set clear payment policy. As an example, you can have it written in your website as a Payment Policy. To ask for a deposit in advance for a big project is also way to avoid cash flow problems in your business.
3. Send invoices on time
I advise all businesses to be disciplined about sending all invoices and do it upon every project accomplishment. The sooner you invoice, the sooner you get paid. Even a delay in 1 week can bring you a lot of problem with cash flow in your business, especially if we are talking about big amount. Nowadays a distraction can cause problems and your clients can simply forget about paying to you. Try to send a «thank you» letter saying how much you appreciate working with them, and some customers may remember the fact they forgot to pay you. It can be a positive way to remind about yourself.
4. Make it easier for your customers to pay you
Try to offer your customers a range of different payment methods - cash, checks, debit and credit cards, and online and offline money transfer service. These options are all useful—and could result in getting paid much faster.
5. Consider discounts for early payment
Some clients can pay much faster if they have discounts. Introducing an opportunity of 5 percent discount for payment within a week while having 30 days standard payment policy can encourage your customers to pay immediately.
6. Collection agency
If you tried to remind gently about yourself, to call, to re-send the invoice and there is no result, consider outsourcing collections to an outside collection agency. They can follow your clients up for you and safe your time.
Have you ever experienced cash flow problems in your business? What do you think is the best way to prevent it? If you have your question, please write it below, I would be glad to answer your questions or to introduce your project to my team at Astorts Group to be evaluated.