Smart small business owners stay on top of their cash flow, monitoring their financial statements regularly. These owners can tell you just how much money is coming in and going out of their business.(Image: iStock/andresr)
If you’ve been less than diligent about monitoring your business’s money, these tips can help you boost your business’s cash flow:
1. Choose a Good Tool to Monitor Cash Flow
Online accounting software such as QuickBooks Online makes it simple to reconcile your accounts, generate reports, and more. Information is secure in the cloud, making it easy for you to stay on top of your cash flow wherever you are.
2. See Where You Can Cut Costs
Focus on recurring monthly, quarterly, or annual expenses. Can you cut back on utilities, rent, or payroll? Are you spending money on subscriptions or services you’re not using or insurance you no longer need? Can you renegotiate the terms of outstanding loans or leases?
3. Cash in on Assets
Do you have equipment you no longer use or inventory that’s becoming obsolete? Consider selling it to generate quick cash.
4. Open a Business Line of Credit
A business line of credit is a good insurance policy against cash flow problems. You may be able to get a line of credit for a percentage of your accounts receivable or inventory if you use them as collateral.
Also, look for business credit cards with rewards such as points you can use toward travel or business purchases. In addition to providing a cushion for lean times, business credit cards also categorize your purchases, so it’s easier to track expenses.
For more information, check out, “5 Signs Your Business Is Ready for a Credit Card.”
5. Lease Equipment Instead of Buying
By leasing vehicles, computers, and other business equipment, you get access to the latest features and avoid tying up cash—but you still get to expense the lease costs on your business taxes.
6. Issue Invoices Promptly
Send invoices when the work is completed or products are delivered. Why wait? Find out the specific person, job title, and address to send your invoices to so they don’t get lost in a shuffle from department to department. Design your invoices so they’re straightforward and easy to read, with key areas like due date, amount due, where to send payment and payment methods highlighted. Speed things up further by emailing invoices instead of mailing them. Establish a process for following up with late or delinquent payers:
- An initial form letter 10 days following receipt asking for payment.
- A second follow-up letter—more aggressive—in 20 days demanding payment.
- A third letter in 30 days and a phone call from your collections clerk seeking payment.
If you’re on the road and in a pinch, try the free instant invoice creators Invoice-o-matic and invoiceto.me. They’re so simple, you don’t even have to register—just input your info into a template, then generate a PDF you can email to your customers.
7. Use Mobile Payment Solutions
If you sell products or provide services at customers’ homes or offices, get paid on the spot with mobile apps that use your smartphone or tablet to accept payment by credit and debit card. Square is a widely-used small business mobile payment solution.
8. Offer Customer Deals
Consider offering your customers incentives, such as a percentage off the total, for early payments. Do the math beforehand to ensure the tradeoff (getting paid early) is worth the loss (less money in the long run).
9. Ask for Deposits or Partial Payments on Large Orders or Long-Term Contracts
For example, a building contractor or website developer might charge a 10% deposit upfront before beginning to draw up plans for the project, then charge half the remaining amount when work begins, and the balance upon completion. Charging this way, the company generates enough cash to finance the materials and pay the workers needed for the job.
10. Delay Payments to Vendors
Unless there’s a worthwhile incentive for you to pay early, figure out how late you can pay your vendors without risking late fees or harming your relationship. This keeps the cash in your account and out of your vendor’s until it absolutely has to be there.
11. Require Credit Checks on All New Non-Cash Customers