Cash flow problems are a common cause of concern for small business owners. Since many self-employed individuals deal with tight budgets for the first few years of operation, finding a way to increase cash flow can literally make the difference between remaining open or having to close your doors. Here are 10 tips to increase your business's cash flow.
1. Ask your customers to submit early payments.
If you're working on an extended project, you may run into trouble paying for your needed supplies. One way to alleviate this cash crunch is to ask your client to pay for the work in advance or to put down a deposit on the finished work.
2. Open a merchant account.
Accepting credit cards offers another payment method for your customers to use when paying for their invoices. You will have to submit a percentage of the payment to the credit card company, but extending this additional method of payment can encourage your clients to submit their payments faster.
3. Hold off on paying some bills.
If you have a 30-day window to pay a bill, why not take full advantage of it? Holding off on sending in payments for a couple of weeks can give you a few more days to build up your cash reserves. Make sure you still submit your payments by the deadline.
4. Keep an eye on your accounts receivables.
Many businesses lose money because they fail to keep their accounts receivables organized. Using a simple filing system can help you keep up with your outstanding invoices and avoid missing out on payments that are due.
5. Watch your expense/income ratio.
A good way to find out about your current cash flow situation is to try to operate on a cash in/cash out basis. For a month or two, calculate the amount of income to the amount of expenses to see where your business's cash flow is being used.
6. Simplify your invoices for easier processing.
One way to help your customers pay their invoices on time is to make the invoices as easy to read as possible. Placing the total amount due in bold type near the top of the form can help with this.
7. Make it easier for clients to pay overdue invoices.
If you have clients who have seriously delinquent invoices, offer them a discount if they clear up their accounts within a certain period of time. You may lose a bit of money but you'll also encourage them to resolve their invoices.
8. Send out your invoices as quickly as possible.
Try to get your invoices out as soon as the work is completed. Customers who receive a timely invoice may be more likely to submit their payments quickly.
9. Find a way to slash costs.
Cutting expenses is always a good idea to boost your business's bottom line. Try to consolidate some costs to take advantage of available discounts and eliminate any unnecessary bills.
10. Open up a commercial line of credit.
Before you begin dealing with cash flow troubles, apply for a line of commercial credit at a local bank. This option will give you a bit of a cushion during lean times.
Even though cash flow problems are a common occurrence, they don't have to spell the end of your business. By using these 10 tips to increase your cash flow you can help your company thrive even when sales are slow.