Simple Ways to Boost Your Small Business Cash Flow

Posted by Factor Funding Co. on June 26, 2012

During tough economic times many small businesses experience problems with cash flow. Late customer payments, rising operating costs and loss of sales all affect a company's bottom line. So how can a small business keep its cash flow consistent? Here are eight simple suggestions.

1. Encourage customers to pay invoices early.

If you're having trouble getting your clients to remit their payments on time consider offering them a discount if they in full a few days early. You might offer a small reduction such as 2 to 3 percent to keep from losing money.

2. Change the way you arrange for payment.

Rather than allowing a customer to pay in full after all the work has been completed change your future terms to request half of the payment upfront and a few small installments during the work. Once the project is done send out a final invoice for the remaining amount. Breaking up the fee into installments gives you funding to purchase the necessary supplies and equipment to get the work completed. Customers may also be more willing to send in smaller payments instead of a large lump sum at once.

3. Try to minimize your operating costs.

If your business expenses are going up see if you can save by combining utilities or services into a package. Several telephone and Internet companies offer discounted packages for customers who subscribe to more than one service. You can also hold off on some equipment costs by waiting to replace machinery until absolutely necessary.

4. Reduce the amount of inventory you carry.

While you might qualify for an inventory discount if you purchase a large volume of goods at once you may want to reduce the stock you have on hand particularly if your sales are declining. You'll save a bit of money on each shipment and you'll avoid keeping outdated inventory on your shelves.

5. Hold off on some payments.

Unless a bill offers a discount for early payment wait until it is due before remitting the amount. This gives you a little extra time to save up.

6. Keep up with your accounts receivable.

Maintaining accurate customer records helps you see who owes you and how much they owe. Meticulous records make it possible for you to avoid missing an invoice date.

7. Send out electronic invoices.

Change from sending paper invoices to sending electronic invoices by email. You can even request a read receipt that lets you know that the recipient has read your message. You'll save on postal costs and you'll know when your customer gets the invoice.

8. Request a line of credit for your company.

If you've been in business for a while, think about applying for a business loan. This line of credit can help you get through some lean times.

With these few suggestions, you can improve your small business cash flow without having to go deeply into debt.

New Call-to-action