Yesterday we looked at the importance of trust with our business in order to make sure that we can sustain it, another important factor in running a successful and viable business is good cash flow.
If you own a small business, then you will know how cash flow is important for your business. You will have inventory to buy or services to fulfil. But a lot of clients are only going to pay your invoices after you have completed a job for them. So if you have a long project, or work that takes a long time, then you can have some cash flow issues. So how can you avoid this and avoid getting into too much debt and constantly living in the business account overdraft? Here are some things to consider for your business.
Lease Instead Of Buying
If your business involves certain pieces of equipment, then you might think that you should be buying some of these pieces of equipment. However, if they are costly pieces of equipment, then it will leave you with debt or high monthly repayments to make.
If your business model means that you’re going to need some more cash flow, then it can be a better idea to lease the equipment, rather than buying. Then you only pay for the equipment as and when you need it, rather than having to pay each month to clear the loan that you originally bought it with. It is likely to improve your cash flow if you lease rather than buy.
Ask For Partial Payments
When you are doing work for a client and it is going to take some time, then you still have payments to make and bills to pay during that time. So you could look to set up a payment plan with the client, such as 20% after a certain date, and the remainder on completion. It is worth asking, but some clients won’t be happy to do this. Which is where something like business invoice finance could come in. It is a small loan, that is leant against your invoice. So when you get paid your invoice, you’ll have the money to pay them back. It could help your cash flow if your invoices aren’t always paid promptly.
Everyone loves to get a bargain. So you could offer an incentive for people to pay their invoice earlier. You will get the money when you need it, and the client will feel like they’re getting a good deal. It could lead to repeat custom too; you never know.
Negotiate With Suppliers
If you need to improve cash flow, then you shouldn’t just look at the invoices that you will receive from others. Look at the things that you have to pay for as well. If you use a certain supplier pretty regularly, then could you ask them for a discount for your repeat custom? You could also work to some more flexible payment guidelines if needed. Do what you need to to make the cash flow situation improve.
At the end of the day, one of the best ways to improve cash flow is to be proactive and keep on top of it all. It can help your business to run much more smoothly.