3 Ways to Improve Your Cash Flow Immediately
Cash flow is the lifeblood of your business, and remaining cash flow positive is integral to business success. Although long-term profitability is important, monitoring your cash flow is vital to the day to day running of your company. Being cash flow positive means that at any given time, your income exceeds your expenses. This increases the likelihood that you have funds on hand to purchase supplies, cover employee salaries, and handle other unexpected costs that arise. Here are some tried and proven ways to increase your company cash flow.
Speed Up Income Collection
One of the biggest difficulties facing reliable cash flow is unpaid accounts receivables. While you’re waiting for late-paying clients to honor their invoices, you still have to pay your bills. Speed up the process by offering discounts for early payments and penalties for customers who pay late. Instead of sending out physical invoices and waiting for paper checks, switch to digital invoices sent out by email and online payments. Follow up on customers who haven’t paid their bills with notices at regular intervals.
No matter how much income you make, if you’re paying out more than you’re bringing in, you’re going to have negative cash flow. Come up with a budget that your income can manage, and stick to it. Eliminate expenses that you can’t handle. You may have to purchase less inventory during off-seasons or even let go of some employees whose salaries your income can’t support.
Plan for Shortfalls
Accurate cash flow management includes projections to estimate when funds may be tight in the future. To mitigate these shortfalls, build up a cushion of cash reserves to tide you over during lean times. If your business is seasonal, consider what alternate revenue sources you can tap when income is down. Your secondary source of revenue may be similar to the products or services you usually provide or something completely innovative and different.
For more advice on improving business cash flow, contact ASA Capital Funding.